1. Consider a one-period binomial model of 6 months. Assume the stock price is $63.00, = 0.28, r = 0.05 and the stock's expected return is 14.0%. What is the true probability of the stock going up?
a. 48.2%
b. 56.6%
c. 46.4%
d. 52.4%
2. Axl will be borrowing $200,000 today to buy a house, and he will pay it back with 30 yearly payments starting one year from today. If the effective annual interest rate is 13%, how much will the final payment be if the annual payments are constant?
a. $20,000
b. $7,500
c. $33,000
d. $27,000
e. $6,700