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QUESTION Consider a two-period binomial model in which a stock currently trades at a price of $65. The stock price can go up 20 percent

QUESTION

Consider a two-period binomial model in which a stock currently trades at a price of $65. The stock price can go up 20 percent or down 17 percent each period. The risk-free rate is 5 percent.

(i)Calculate the price of a put option expiring in two periods with an exercise price of $60.

(ii)Calculate the price of a call option expiring in two periods with an exercise price of $70.

Please show the formulae for PUT option price calculation as well as one for CALL price calculation

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