Consider a Stock Index Currently Trading at 128 $u = 1.08$

question 30

Multiple Choice

Consider a stock index currently trading at 128.You have modeled the evolution of this index in a binomial tree and have come up with the following parameters: $u = 1.08$ , $d = 0.93$ .The gross risk-free rate per step of the binomial tree is $R = 1.03$ and the dividend yield on the index is $\delta = 0.01$ .The risk-neutral probability of an up-move in this setting is

• A)0.598
• B)0.660
• C)0.667
• D)0.736

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Definitions:

Craft Union

A labor organization representing workers who practice the same craft or trade, aiming to negotiate better wages, conditions, and rights for its members.

Arbitrator

A neutral third party who resolves disputes between two or more parties outside of the court system, usually in a binding decision.

Mediator

A neutral third party who assists in negotiating and reaching a settlement in a dispute or negotiation.

Collective Bargaining

A process of negotiations between employers and a group of employees aimed at reaching agreements to regulate working conditions.