Consider a one-period binomial model with = 1, where = $100, = 0.08, = 30%, and = 0. Compute American put option prices for = $100, $110, $120, and $130. a. At which strike(s) does early...

Consider a one-period binomial model with

= 1, where

= $100,

= 0.08,

= 30%, and

= 0. Compute American put option prices for

= $100, $110, $120, and $130.

a. At which strike(s) does early exercise occur?

b. Use put-call parity to explain why early exercise does not occur at the other strikes.

c. Use put-call parity to explain why early exercise is sure to occur for all strikes greater than that in your answer to (a).