Consider a Stock Index Currently Trading at 128 $\mathcal { L } = 1.08$

Multiple Choice

Consider a stock index currently trading at 128. You have modeled the evolution of this index in a binomial tree and have come up with the following parameters: $\mathcal { L } = 1.08$ , $d = 0.93$ . The gross risk-free rate per step of the binomial tree is $R = 1.03$ and the dividend yield on the index is $\delta = 0.01$ . The risk-neutral probability of an up-move in this setting is

A) 0.598
B) 0.660
C) 0.667
D) 0.736