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Exercise 3 . 2 Suppose that the stock price on any given day can either be 5 % higher or 4 % lower than on

Exercise

3.2

Suppose that the stock price on any given day can either be

5 %

higher or

4 %

lower than on the previous day. Sketch a tree representing possible stock price movements over the next three days, given that the price today is $

20 .

How many different scenarios can be distinguished?

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