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A stock has a current price $100 and will pay a dividend $2 at the end of second month. The vola- tility of the

 

A stock has a current price $100 and will pay a dividend $2 at the end of second month. The vola- tility of the stock is 30%, and the interest rate is 6%. Use a four-period binomial tree to model the stock price dynamics over the next four months by breaking up the stock into a riskless and a risky part. Display the risky part of the stock price tree and the actual stock price tree.

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