medium · CFA Level I Derivatives
In a one-period binomial model for an option on Oakridge Capital, the stock price S = $50 can either go up to U = $60 or down to D = $42.
If the risk-free rate is 5%, the risk-neutral probability of an up-move is closest to:
- 66.7%
- 50.0%
- 58.3%
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