Suppose that a stock is currently trading at $60 per share and that the stock price can either go up by 25% or down by 20% each year. The physical probability of prices going up is 75% and the physical probability of going down is 25%. One year ago, the one-year spot rate was 2%, the two-year forward rate (f₂) was 4% and the three-year forward rate (f₃) was 4%. The expectations hypothesis holds. Suppose that we are interested in pricing an American put option on this stock. The option has a strike price of $55, and its maturity date is exactly two years from now. What is the price of the option at time zero?

Group of answer choices

3.34

8.32

11.77

3.54

7.30