In the Jarrow-Rudd (JR) Binomial Model, the Volatility Is Given $\sigma = 0.2$

Multiple Choice

In the Jarrow-Rudd (JR) binomial model, the volatility is given as $\sigma = 0.2$ . The risk-free rate of interest is 2%. What is the risk-neutral probability of an up move on a binomial tree with a time step of one month?

A) 0.45
B) 0.50
C) 0.55
D) 0.60