Question 1: European and American Puts (3/10) You wish to price an European put on a stock which currently trades for $100. The put expires in nine months, and has a strike of $100. The nine-month interest rate (annualized continuously compounded) is 5%. The estimated volatility of the stock is 25%. The stock pays no dividends. (i) What is the Black-Scholes-Merton price of the European put? (ii) What is the price of the European put according to a standard 3-step binomial tree? (iii) Suppose the standard 3-step binomial tree is the true description of stock price arbitrage? If not, explain why not. If so, explain in detail what your strategy is. movements in the real world. If the European put is trading for $6, is there an (iv) What is the price of the American put according to a 3-step binomial tree? (v) Under what circumstances, if any, do you exercise the put before maturity