For a Stock Price Following a Binomial Process,the Up Factor

question 9

Multiple Choice

For a stock price following a binomial process,the up factor U = 1.1,the down factor D= 0.9,the dollar return (1 +R) = 1.05 percent (per period) ,and the initial stock price is 100.The probability that the stock will have 18 up movements and 2 down movements is:

• A) 0.0556
• B) 0.0669
• C) 0.075
• D) 0.10
• E) None of these answers are correct.

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