Question: Assume a four - period binomial tree model with U = 1 . 0 7 and D = 1 / U . The interest rate

Assume a four-period binomial tree model with U=1.07 and D=1/U. The interest rate is 1.6% per year (continuous compounding) and each step in the tree is 3 months.
In this model, what is the risk-neutral probability that the stock price will go up three times and drop once over the four periods?

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