QUESTION 5 This question can be a little tough. In the binomial tree model, if one plus the risk-free rate is LOWER than the down factor it sounds a little word, but a down factor could be larger than one under some circumstance), then which of the following statement is NOT correct? One could arbitrage for a riskless profit The risk-neutral probability doesn't make sense any more. To arbitrage for the riskless profit, an investor need to long the stock with borrowed money To arbitrage for the riskless profit, an investor need to short the stock and invest the proceeds at the risk free rate QUESTION 6 6.00% (per period), and Suppose you are given the following information stock price-35, strike price. 33, 1.466,0 -0.756, n. 2 (time steps), pays $2 dividend at the end of the first period. The early exercise premium of the above American put option is closest to $0.1605 $0.2016 $0.3637 $0.4616