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Posted on Aug 09, 2024

The price of a particular stock is currently $ 4 0 . The stock price a year from now will be either $ 5 0

The price of a particular stock is currently $

40 .

The stock price a year from now will be either $

50

or $

30

with

equal probabilities. The risk

-

free rate is

5 % .

Using the binomial option pricing model, what is the risk

-

neutral

probability that the stock price is $

30

in one year?

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