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The stock price is currently at $50 per share. In one month it is expected to either go up to $62.5 or down to $40.
The stock price is currently at $50 per share. In one month it is expected to either go up to $62.5 or down to $40. An at-the-money European call option with 2 months to maturity is trading on this stock. Risk-free asset pays 0.5% interest rate per month.
Find u, d, and R to plug into the binomial tree formula. Then, Based on u, d, and R build the binomial tree for the stock.
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