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Consider a European put option with strike price K = 100 based on a Binomial model with T = 5, S0 = 100, u = 2, d = 0.6, and r = 0.05. (a) Use an Exc100 Stock Price 100 100 Strike Price 40 160 16 64 256 6.4 25.6 102.4 409.6 2.56 10.24 40.96 163.84 655.36 1.6 u value 1.024 4.096 16.384 68.536 262.144 1048.576 0.4 d value 98.976 95.904 83.616 31.464 el spreadsheet to find the arbitrage-free initial price of the put option.

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