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A stock price is currently $30. During each two-month period for the next four months...

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Accounting

A stock price is currently $30. During each two-month period for the next four months it will increase by 8% or decrease by 10%. The risk-free interest rate is 4%. Use a two-step tree to calculate the value of a derivative that pays off [max(30-ST, 0)]2, where ST is the stock price in four months. If the derivative is American-style, should it be exercised early?

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