Question: Let S = $80, K = $70, r = 6% (continuously compounded), d = 2%, s = 40%, T = 1, and n = 2.

Let S = $80, K = $70, r = 6% (continuously compounded), d = 2%, s = 40%, T = 1, and n = 2. In this situation, the appropriate values of u and d are 1.35370 and 0.76886, 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?

Option D is correct, but how? Can you provide solution for Excel? formulas and steps or actual excel work sheet please?

Answers:	a. 0.4882
	b. 0.5097
	c. 0.3533
	d. 0.4298
	e. 0.5702

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