The current price of a non-dividend stock is 50 the stock, Financial Management

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The current price of a non-dividend stock is 50 the stock

The current price of a non-dividend stock is $50. The stock price is expected to either rise 20% or fall 20% each year and the annually compounded risk-free rate is 5% p.a. The option has 2 years to expiration and the exercise price of the option is $52. (a) Using the binomial option pricing model by dividing the life of the option into two intervals of length one-year each, what is the value of an American put option on the stock?(b) What is the value of the right of early exercise?

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Financial Management: The current price of a non-dividend stock is 50 the stock

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