Binomial Option Pricing Case 1:

A stock is currently priced at $39/share and pays no dividends. The periodic risk-free rate of interest is 2%. The up factor of 1.25 and a down factor of 0.8.

Binomial Option Pricing Case 1: In a one-period binomial tree option pricing model, if the chance for the underlying stock price to go down has increased to 95% from 45%, then the theoretical price of a European put option with a strike price of 36 will:

A.decrease slightly.

B.not be influenced by this change in .

C.increase by a large amount.

D.remain the same.