Prices of a stock are modeled using a two-period binomial tree, with each period being six months.
The continuously compounded risk free interest rate is 7 %
The stock pays 2 % continuous dividend.
The current stock price is 65
The volatility of the stock is 40 %.
Consider an American put option on the stock expiring in a year with a strike price of $65.
What is the premium of the option?