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  3. (b) let the current asset price be 100 dollars and

(b) Let the current asset price be 100 dollars and after time T, the price...

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(b) Let the current asset price be 100 dollars and after time T, the price either goes up to 110 dollars or down to 91 dollars. Suppose the risk-free interest rate is 0.1. Assume a risk-neutral world setting. (1) Find the probability of up movement for T = 0.5 year. (ii) Determine how the probability of up movement changes if the risk-free interest rate decreases

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