Question: Let S0 = 4, u = 2, d = 1/2, r = 1/4 and the pay-off at time three is given by V3 = S3.

Let S0 = 4, u = 2, d = 1/2, r = 1/4 and the pay-off at time three is given by V3 = S3. Find the no-arbitrage price V0.

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