Question: Let S = $55, K = $65, r = 4% (continuously compounded), d = 2%, s = 35%, and T = 2. What are the

Let S = $55, K = $65, r = 4% (continuously compounded), d = 2%, s = 35%, and T = 2. What are the appropriate values of u and d to build a 2-period binomial stock price tree? (Use the formulas from the main part of the chapter and lecture notes, not the alternative formulas in the appendix.)

a. u = 1.4477; d = 0.7189
b. u = 1.3203; d = 0.6283
c. u = 1.6055; d = 0.5306
d. u = 1.8328; d = 0.9102
e. u = 1.2856; d = 0.5766

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