One should use a multiperiod binomial model to evaluate an American put option because the Black-Scholes formula does not allow for early exercise.

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Quizplus · Accepted Answer

A multiperiod binomial model can account for early exercise options, which is necessary for evaluating American put options. The Black-Scholes formula can only be used for European options because it assumes that the option will only be exercised at its expiration date.

One Should Use a Multiperiod Binomial Model to Evaluate an American