Please show work.
Consider a two-period binomial tree with the following parameters: S = 100, u = 1:20, d = 0:80, and R = 1:10. Suppose also that a dividend of $5 is expected after one period.
Find the tree of prices of a European Put option with a strike of 100 expiring in two periods.
Find the tree of prices of an American Put option with a strike of 100 expiring in two periods.
Is there a difference between the European and American Put price and why (if there is any)?