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We consider a one-step binomial tree in which the parameters are u = 1.2, d d=0.8, p=0.12, T = 0.25, fu = 3, = ,

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We consider a one-step binomial tree in which the parameters are u = 1.2, d d=0.8, p=0.12, T = 0.25, fu = 3, = , fa=0. Evaluate the followings: (1) Calculate the probability p of an up movement in a risk-neutral world. (2) Compute the current price f

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