A Binomial Tree with One-Month Time Steps Is Used to Value

Multiple Choice

A binomial tree with one-month time steps is used to value an index option.The interest rate is 3% per annum and the dividend yield is 1% per annum.The volatility of the index is 16%.What is the probability of an up movement?

A) 0.4704
B) 0.5065
C) 0.5592
D) 0.5833