Question: Pricing option using Real Probabilities 9. For a one-period binomial model for the price of a stock, you are given: a. The period is 1

 Pricing option using Real Probabilities 9. For a one-period binomial model

Pricing option using Real Probabilities 9. For a one-period binomial model for the price of a stock, you are given: a. The period is 1 year b. The stock pays dividends at a rate proportional to its price. The dividend yield is 5%. C. u=1.2, and d=0.8 d. The continuously compounded annual expected return on the stock is 10% e. The continuously compounded risk-free interest rate is 8% Calculate the true probability of the stock price going down in one year

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