In a One-Period Binomial Model, Assume That the Current Stock

question 14

Multiple Choice

In a one-period binomial model, assume that the current stock price is $100, and that it will rise to $110 or fall to $90 after one month. If an investment of a dollar at the risk-free rate returns $1.001668 after one month, what is the standard deviation of monthly stock return under the risk-neutral probabilities?

• A) 9.93%
• B) 9.97%
• C) 10.00%
• D) 20.00%

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