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2. True/False Please mark whether each of the following statements is true or false. You do NOT need to provide justifi- cation. (a) Consider a
2. True/False Please mark whether each of the following statements is true or false. You do NOT need to provide justifi- cation. (a) Consider a stock whose required return is higher than the risk-free return. Then, in a binomial tree, the real probability of an increase in the price is higher than the risk-neutral probability of the increase. ( TRUE / FALSE) (b) In the risk-neutral valuation, we penalize risk by changing the probability. ( TRUE / FALSE ) (C) By setting covat and d = e-ovAt in a binomial tree, can make the stock return required risk-averse investors the same as the risk-free return. ( TRUE / FALSE )
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