A stock price is currently $42. The risk-free interest rate is APR 4% with continuous compounding. What is the value of a six-month American put option with a strike price of $46 using a two-step binomial option pricing model? Stock price moves up by 5% or down by 7% for each three months.
A) Less than $3.0
B) Larger than $3.0 but less than $3.7
C) Larger than $3.7 but less than $4.3
D) Larger than $4.3 but less than $5.0
