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A stock index is currently 1,500. ITs volatility is 18% per annum. The continuously compounded risk-free...

A stock index is currently 1,500. ITs volatility is 18% per annum. The continuously compounded risk-free rate is 4% per annum for all maturities.

(1) Calculate values for u,d, and p when a six-month time step is used.

(2) Calculate the value a 12-month American put option with a strike price of 1,480 given by a two-step binomial tree.

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