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Assume that in a two period model the current stock price is $25/share. The gross...

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Accounting

Assume that in a two period model the current stock price is $25/share. The gross rate of return on the stock over each period is either +40% or -20% while the single period simple rate of interest is 10%. Can you price a European put option on the stock with a strike of $30/share that expires at the end of the second period? Would you be able to price an American put with the same characteristics as the one above? Does it ever make sense to exercise the put at the end of the first period?

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