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Consider a binomial tree with two future periods (T=0,1,2) in which the price can either go up by 60% or down by 40% every period.

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Consider a binomial tree with two future periods (T=0,1,2) in which the price can either go up by 60% or down by 40% every period. There is equal chance that price goes up or down. At period 0, the investor decides to allocate 30% of her initial wealth of $1000 in the risky asset. In period 1, the investor allocates 80% of her wealth in the risky asset if the asset goes up, and 20% of her wealth in the risky asset if the asset goes down. The risk-free asset yields a return of 10% and the initial price of the stock is 100. What is the expected terminal wealth of the investor? Select one: O None of the options provided O 2750 0 1130 O 2240 1210 Clear my choice

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