ASSUME THAT A STOCK’S PRICE OVER THE NEXT TWO PERIODS IS AS SHOWN...

13. Assume that a stock’s price over the next two periods is as shown below. Time=0 Time=1 Time=2 S

0

=80 S

u

=88 S

uu

=96.8 S

d

=72 S

ud.du

=79.2 S

dd

=64.8 The initial value of the stock is $80. The probability of an up move in any given period is 75% and the probability of a down move in any given period is 25%. Using the binomial model, the probability that the stock’s price will be $79.20 at the end of two periods is closest to: A. 18.75%. B. 37.50%. C. 56.25%.