Determine the price of a put option with a strike price


Question: A stock is worth $40 today. In the next six months it may increase to $46 or decrease to $35. The risk-free rate of interest is 4% per year. Use the binomial model to determine the price of a put option with a strike price of $40 and an expiration date in six months.

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Finance Basics: Determine the price of a put option with a strike price
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