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Consider a stock which is currently selling for $50. Construct a two-step binomial tree, 1-month and...

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Finance

Consider a stock which is currently selling for $50. Construct atwo-step binomial tree, 1-month and 2-months respectively for eachof the two steps. The stock market volatility is 30%, the rate ofinterest is assumed to be 5% and the exercise price is $52.

(i) Calculate the price of an American Put.

(ii) Provide a graphical illustration to demonstrate how the putprice and the put payoff change with respect to changes in thestock price.

(iii) Put all in an excel format

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