Consider a Binomial Tree Setting in Which in Each Period $u = 1.10$

question 18

Multiple Choice

Consider a binomial tree setting in which in each period the price goes up by $u = 1.10$ (with probability $p = 0.60$ ) or down by $d = 0.90$ (with probability $1 - p = 0.40$ ) . The risk-free interest rate per time step is zero, so a dollar invested at the beginning of the period returns a dollar at the end of the period. In this setting, the risk-neutral probability of a two-period call with strike $K = 95$ finishing in-the-money is

• A) 0.25
• B) 0.36.
• C) 0.75
• D) 0.84

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Definitions:

Female

Pertains to the sex that in many species produces eggs and in mammals is typically characterized by presence of XX chromosomes.

Kinsey's Survey

A comprehensive study of human sexual behavior conducted by Alfred Kinsey and his colleagues, renowned for its insight into the complexity of sexual practices.

Homosexual Orientations

A sexual orientation characterized by a romantic or sexual attraction to individuals of the same gender.

Nonrandom Sample

A sample that is not selected using random methods, potentially leading to biased outcomes due to the lack of representativeness.