Question: In the binomial model, if the stock moves up by a factor u and down by a factor d, and a $1 investment in a

In the binomial model, if the stock moves up by a factor u and down by a factor d, and a $1 investment in a risk-free bond returns an amount R per time step, which of the following statements is true in a market that is free from arbitrage?

d < u < R

u < d < R

d < R < u

R < d < u

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