Current value = 100

Risk free rate = 10%

2-step binomial model

stock price = less than 130 kr

t= 8 months = (8/ 12)%2 = 0.33333

Consider the non-dividend paying asset with a current value of 100 kr that is described by the 2-step Binomial model depicted below. Assume that the continuously compounded risk free interest rate is 10% per annum for all maturities. How many percent is the risk-neutral probability that the stock price is less than 130 kr in 8 months? Keep at least four decimals in all your calculations. Your answer should be rounded off to nearest integer and contain no decimals. Example if you found that the probability was 0.1345 i.e. 13.45% then you should answer: 13 156.2500 125.0000 100.0000 100.000 80.0000 64.0000 months 0 4 8 Consider the non-dividend paying asset with a current value of 100 kr that is described by the 2-step Binomial model depicted below. Assume that the continuously compounded risk free interest rate is 10% per annum for all maturities. How many percent is the risk-neutral probability that the stock price is less than 130 kr in 8 months? Keep at least four decimals in all your calculations. Your answer should be rounded off to nearest integer and contain no decimals. Example if you found that the probability was 0.1345 i.e. 13.45% then you should answer: 13 156.2500 125.0000 100.0000 100.000 80.0000 64.0000 months 0 4 8