Question right now the risk free rate is 45 and the stock, Ask an Expert

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Question: Right now, the risk free rate is 4.5% and the stock price for a risky tech startup is $325, with a volatility of 32%. Using the binomial tree model, for a one month time step:

a) what is the percentage up movement?

b) what is the percentage down movement?

c) what is the probability of an up movement in a risk neutral world?

d) what is the probablity of a down movement in a risk neutral world?

e) use a five-step tree to value a five month European put option with a strike price of $320

d) use a five-step tree to value a five month American put option with a strike price of $320

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M93061082

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