Binomial tree for stock price dynamic change

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You have chosen a binomial tree to model the price dynamics of a stock. The probability of an up move is 0.70. If the stock moves up, it earns a 10% return. If the stockmoves down, it loses a 10% return. The current stock price is $80.

1. Based on the binomial tree for the stock price' dynamic change. Compute the possible stock prices after two periods.

2. Compute the corresponding probabilities for each possible price.

3. Compute the expected value of the stock price at the end of two periods..

Reference no: EM133272655

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