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Suppose you are attempting to value a one year maturity

Suppose you are attempting to value a one- year maturity option on a stock with volatility ( i. e., annualized standard deviation) of σ 5 .40. What would be the appropriate values for u and d if your binomial model is set up using

a. 1 period of one year?

b. 4 subperiods, each 3 months?

c. 12 subperiods, each 1 month?

a. 1 period of one year?

b. 4 subperiods, each 3 months?

c. 12 subperiods, each 1 month?

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