Question: 1) In the version of the binomial model in which the factors by which the stock price goes up or down, u and d ,

1) In the version of the binomial model in which the factors by which the stock price goes up or down, u and d, are related by d = 1/u, if the volatility is .40 and the time step is 3 months, then the factor by which the underlying stock could go up is u =

2) Suppose Ralph's stock price is currently $50. In the next six months it will either fall to $30 or rise to $80. In the binomial model, what is the delta of a call option with an exercise price of $50?

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