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Construct a 2 period binomial lattice

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Reference no: EM132722337

A stock is priced at $100. It pays a continuous dividend of 2% per year. The riskless rate is 3% per year continuously compounded. The volatility of the stock is 23% per year.

a) Construct a 2 period binomial lattice over a six month time horizon showing the stock prices. Identify the values for u, d and the risk neutral probability, p as well as the discount factor for each period.

Reference no: EM132722337

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