A stock price is currently $40. Over each of the next two three-month periods it is expected to go up by 10% or down by 10%. The risk-free interest rate is 5% per annum with continuous compounding.

(1). Assume that the risk-neutral probability of an upward stock price movement is the same in each of the next two three-month periods. What is the risk-neutral probability, p, of an upward stock price movement?