Calculate the risk-neutral probability

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You are pricing a derivative using the risk-netural approach on a Binomial tree. The length of each branch in the tree (delta t) is 7 months. The riskfree rate of interest is 4% per annum. The proportional up movement in stock price is u = 1.4.

Calculate the risk-neutral probability (p*) that share price will move up.

Reference no: EM132691150

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