A stock is priced at $100.00 and follows a one-period binomial process with an up move that equals 1.05 and a down move that equals 0.97. If 1 million Bernoulli trials are conducted, and the average terminal stock price is $102.00, the probability of an up move (p ) is closest to:
Why does pUp(105) + pDown(97) = 102?
I can’t seem to get my head wrapped around why is it = 102…