Determine percentage down movement in binomial tree, Finance Basics

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Determine percentage down movement in binomial tree

Problem: The current price of a non-dividend-paying stock is $100 with a volatility of 30%, risk-free rate of 5% per annum (continuously compounded) for all maturities. Using the Cox-Ross-Rubinstein approach determines the percentage down movement in a three-step binomial tree for a European option that matures in nine-month.

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Finance Basics: Determine percentage down movement in binomial tree

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