You are given the following information: Current stock price is 15 (stock pays no dividend) Annual stock volatility is 25% Discount rate is 8% (continuous compounding) You purchased an American put option on this stock with a strike price of 14 (K). The option matures in one year and there are two periods in total. Use the binominal tree pricing model to value this option by answering the following questions. Estimate the up rate of the stock (u), down rate of the stock (d) and risk neutral probability (p). Express your answers as a fraction and round to 4.d.p. Up Rate of the Stock Is Down Rate of the stock is Probability is To estimate the put option premium, complete the following binomal tree. Round your answers to 4.d.p. T=0 First step Second step Price 4 = = Payoff 4= Price 1 Payoff 1 0 = = Price 2 = Payoff 2= Price 3 = Payoff 3= 1 Price 5= = Payoff 5= Price 6= Payoff 6= 2