Question: 1. Consider a 3-period binomial model with t 0, 1, 2, 3. There are a stock and a risk-free asset. The initial stock price is

1. Consider a 3-period binomial model with t 0, 1, 2, 3. There are a stock and a risk-free asset. The initial stock price is $4 and the stock price doubles with probability 2/3 and drops to one-half with probability 1/3 each period. The risk-free rate is 1/4 compounded once each period. Compute the risk-neutral probability at each node

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