a. Using S = $100, r = 0.08, and 8 = 0, what are the 4-month, 8-month,
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a. Using S = $100, r = 0.08, and 8 = 0, what are the 4-month, 8-month, and 1-year forward prices?
b. Verify your answers in
(a) by computing the risk-neutral expected stock price in the first, second, and third binomial period. Use equation (11.17) to determine the probability of reaching each node.
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