Question: Let S = $65, K = $75, r = 7% (continuously compounded), d = 2%, s = 30%, T = 1, and n = 4.

Let S = $65, K = $75, r = 7% (continuously compounded), d = 2%, s = 30%, T = 1, and n = 4. In this situation, the appropriate values of u and d are 1.17645 and 0.87153, respectively. What is the value of p*, the risk-neutral probability of an upward movement in the stock price at any node of the binomial tree?

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