Question: If the initial rate at any node at time t on a binomial interest rate tree is r 1 and the two ensuing nodes after

If the initial rate at any node at time t on a binomial interest rate tree is r₁ and the two ensuing nodes after time h = 1 year are r_u (with probability p) and r_d (with probability 1 − p), then given that the two-period zero-coupon rate is r₂, write down the analytic expression for the probability p assuming simple compounding for each period.

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