Consider the value of an European put option with strike price $110 and expiration date of 6 months. The underlying stock has current price $100, binomial lattice parameters for a period of 1 month of u = 1.04 and d = 1/u. The risk free interest rate is 12% per year, compounded monthly.
a. Show calculations of d, R and q below.
b. Without using a spreadsheet, give the formula for Pdddddd below and its numerical value.
c. Determine the current value of the put option using a spreadsheet (excel). Circle your answer for the value of the put option and write it here: