Question: Question B At time 0, the zero maturing at time 0.5 has a price of 0.97 per $1 par, and the zero maturing at time

Question B At time 0, the zero maturing at time 0.5

Question B At time 0, the zero maturing at time 0.5 has a price of 0.97 per $1 par, and the zero maturing at time 1 has a price of 0.9409 per $1 par. At time 0.5, there will be one of two possible states: in the up state, the price of $1 par of a zero maturing at time 1 will be $0.96; in the "down state, the price of this zero will be $0.98. The risk-neutral probability of the each outcome is 50%. This information is summarized below: Zero maturing at time 0.5 Time 0 Time 0.5 Zero maturing at time 1 Time 0 Time 0.5 $0.96 $0.97

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