US risk-free rate: R (US) F = 1.5% p.a. Canadian risk-free rate: R (CA) F = 2.2% p.a.

All interest rates are given with continuous compounding.

Problem 5 (8 points) Consider a 1-year European traded at the CBOE both with exercise price of 74 on an underlying stock with price 72 and stock price volatility of 20%. For this question you may round intermediate values to 2 decimal points. Determine the value of the European put option using a two step binomial tree. Problem 5 (8 points) Consider a 1-year European traded at the CBOE both with exercise price of 74 on an underlying stock with price 72 and stock price volatility of 20%. For this question you may round intermediate values to 2 decimal points. Determine the value of the European put option using a two step binomial tree