Question: Let S = $75, K = $85, r = 6% (continuously compounded), d = 1%, s = 30%, and T = 1.5. What are the

Let S = $75, K = $85, r = 6% (continuously compounded), d = 1%, s = 30%, and T = 1.5. 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.)

Selected Answer:	d. u = 1.0676; d = 0.6814
Answers:	a. u = 1.3462; d = 0.8007
	b. u = 1.2493; d = 0.9744
	c. u = 1.0931; d = 0.6429
	d. u = 1.0676; d = 0.6814
	e. u = 1.1726; d = 0.9272

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