Consider a Two-Period Binomial Model,where Each Period Is 6 Months

question 10

Multiple Choice

Consider a two-period binomial model,where each period is 6 months.Assume the stock price is $50.00,σ = 0.20,r = 0.06 and the dividend yield = 3.5%.What is the lowest strike price where early exercise would occur with an American put option?

• A) $50
• B) $55
• C) $60
• D) $65

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