You calculated the following values for a two-year in-the-money American put with $8 intrinsic value on a non-dividend paying stock currently trading at $102:

Su = $127.50 Sd = $81.6 Assume n = 2, the risk-free rate is 8% per annum, and the stock is expected to grow at the same rate for the next two years.

3.Calculate P_u², P_ud, P_d², P_u, and P_d.

4. Calculate current price of the put.

5.Calculate the time value of the put, the initial and subsequent hedge ratios, and the rate of return for a hedged portfolio if the stock goes down after one period.