Suppose the price of a stock today is 510. The strike price of call and put options trading on the stock is 490. These options mature in 6 months. The discount risk-free rate is 6% per half annum. The risk-neutral binomial analysis with a time step of 3 months for a European call option produces an option value of 53.3. The downward factor for the lattice model of the stock-price process is 0.928. Identify 1) the risk-neutral robabilities of the binomial tree, and 2) the bi-monthly volatility of stock returns. Show your calculations.
