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You are given the following information for a one-period binomial tree Each period is one year The current price of the stock S = 100
You are given the following information for a one-period binomial tree Each period is one year The current price of the stock S = 100 The stock pays dividends at a rate proportional to its price with the dividend yield d = 2% The continuously compounded risk-free interest rate is r u = 1.3, where Su is the stock price if the stock price goes up d = 0.7, where Sd is is the stock price if the stock price goes down The current premium of a one-year at-the-money put option is 12.82 Immediately after purchasing the put option, the stock price drops to 95. Assuming that u, d, r, and the strike price of the put option remain unchanged, recalculate the premium of the put option. 14.32 O 16.82 O 18.32 12.82 20.82
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