An analyst is pricing a 2-year European put option on a non-dividend-paying stock using a binomial tree with two steps of one year each. The stock price is currently USD 38, and the strike price of the put is USD 40. What is the value of the put closest to, assuming that the annual risk-free rate will remain constant at 2% over the next two years and the annual stock volatility is 15%?
An analyst is pricing a 2-year European put option on a non-dividend-paying stock using a binomial tree with two steps of one year each. The stock price is currently USD 38, and the strike price of the put is USD 40. What is the value of the put closest to, assuming that the annual risk-free rate will remain constant at 2% over the next two years and the annual stock volatility is 15%? A.3.04 USD; B.3.48 USD; C.3.62 USD; D.3.81 USD