If the Volatility of a Non-Dividend Paying Stock Is 20

question 3

Multiple Choice

If the volatility of a non-dividend paying stock is 20% per annum and a risk-free rate is 5% per annum,which of the following is closest to the Cox,Ross,Rubinstein parameter u for a tree with a three-month time step?

• A) 1.05
• B) 1.07
• C) 1.09
• D) 1.11

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