# For a one-period binomial model for the price of a stock, you are given: (i) The period

## Question:

For a one-period binomial model for the price of a stock, you are given:

(i) The period is one year.

(ii) The stock pays no dividends.

(iii) u = 1.433, where u is one plus the rate of capital gain on the stock if the price goes up.

(iv) d = 0.756, where d is one plus the rate of capital loss on the stock if the price goes down.

(v) The continuously compounded annual expected return on the stock is 10%.

Calculate the true probability of the stock price going up.

(A) 0.52

(B) 0.57

(C) 0.62

(D) 0.67

(E) 0.72

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