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You are evaluating a two-year put option on RACE (Ferrari), who currently has a stock price of $40/share. The risk-free rate is 6%. The tree
You are evaluating a two-year put option on RACE (Ferrari), who currently has a stock price of $40/share. The risk-free rate is 6%. The tree of RACE's stock prices for the next two years is the following: 49 44. 41 40 40 32 1. Find the value of a European put option with a strike price of $42. 2. Find the value of an American put option with a strike price of $42 (assume that you can exercise the option at year 1 or year 2, but you can't exercise the option today)
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