In the Binomial Model, If the Stock Moves Up by a Factor

Multiple Choice

In the binomial model, if the stock moves up by a factor $u$ and down by a factor $d$ , and a $1 investment in a risk-free bond returns an amount $R$ per time step, which of the following statements is true in a market that is free from arbitrage?

A) $d < u < R$
B) $\mathcal { U } < R < d$
C) $d < R < u$
D) $R < d < u$