Problem 4.6.18. (European vs American prices: Three-period version) You use the following information to construct a binomial forward tree for modeling the price move- ments of a stock. (i) The length of each period is 4 months. (ii) The current stock price is 100. (iii) The stock's volatility is 30%. (iv) The stock pays no dividends. (v) The continuously compounded risk-free interest rate is 8%. Let P, be the price of a 95-strike 1-year European put option on the stock, and Pu be the price of an otherwise identical American put option. Calculate Pu-P. Problem 4.6.18. (European vs American prices: Three-period version) You use the following information to construct a binomial forward tree for modeling the price move- ments of a stock. (i) The length of each period is 4 months. (ii) The current stock price is 100. (iii) The stock's volatility is 30%. (iv) The stock pays no dividends. (v) The continuously compounded risk-free interest rate is 8%. Let P, be the price of a 95-strike 1-year European put option on the stock, and Pu be the price of an otherwise identical American put option. Calculate Pu-P