Question: In a Binomial tree model, the stock price can either go up by 20% or down by 20% (i.e., u = 1.2 and d =

In a Binomial tree model, the stock price can either go up by 20% or down by 20% (i.e., u = 1.2 and d = 0.8). If the length of each step is 4 months and the risk-neutral probability of a stock price to go up for each time step is 0.52, what is the continuously compounded risk-free rate in annual terms? Assume that the underlying stock does not pay dividends.

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