Question: This is relating to a Risk-Neutral Binomial Tree. I was wondering on how do you get those values in the stuffs in red circle? (Using
This is relating to a Risk-Neutral Binomial Tree. I was wondering on how do you get those values in the stuffs in red circle? (Using the formula given)
The Picture is basically the tree with the solution, but I'm trying to find out how they computed or use the formula to get those values
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Using the formula 1 = [(1+r1-d)/(u - d)], the tree diagram for the risk neutral probabilities derived from the returns to investing in the market is: Tuz.70 s1.20 a=2/3 $1.107 $1.00 1-1=13 -To=.30_$1.05 $1.05 TLF.65 $0.95 1-TOF 25._$0.90
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