In the Binomial Model,if the Stock Moves Up by a Factor

question 24

Multiple Choice

In the binomial model,if the stock moves up by a factor $\mathcal { U }$ and down by a factor $d$ ,and a $1 investment in a risk-free bond returns an amount $R$ per time step,which of the following statements is true in a market that is free from arbitrage?

• A) \(d < u < R\)
• B) \(u < R < d\)
• C) \(d < R < U\)
• D) \(R < d < u\)

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Definitions:

Species Name

The scientific naming of species, typically consisting of a genus name followed by a specific epithet, in the system of binomial nomenclature.

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(1) An evolutionary modification that improves an organism’s chances of survival and reproductive success. (2) A decline in the response of a receptor subjected to repeated or prolonged stimulation.

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A single, living entity that can function on its own, performing all necessary activities of life.