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could you please answer this question and give

step-by-step calculations. thank you so much !

Q6.png

Part B
Consider now s three-period American put option pricing model. Under these
conditions, we will have the terminal prices,
Puuu
=
max { A - uuuSo, 0}
(13)
Puud = Pudu = Pduu
=
max { X - uudSo, 0}
(14)
Padu = Paud = Pudd
=
max { X - dduSo, 0}
(15)
Padd
=
max { X - dddSo, 0}
(16)
Calculate Puu, Pud and Pad then Pu, Pa and then Po for u = 1.15, d = 0.85,
r = 0.045, So = $45 for strikes X = $40, $45, $50. Compare these to European
put options with the same inputs. Calculate the early-exercise premiums:
EEPO = Po - Po
(17)

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