One period binomial model for option calculating "D" (mock aft. q45)

I have been doing and I can’t understand the question ofbinomial tree , CFA is taking D=0,9 because the say that down move in stock is 10% and up move is 15%(U=1,15).

But in my kaplan notes they say that once you have the size up move you have to calculate you D as 1/1,15.


The down factor _ does not have to be _ the reciprocal of the up factor.

The formulae for the risk-neutral probabilities still apply.


Another question…

And for r(RF) if we use quarters for periods and they give us RF annualized of 3%. May I have to use 0,03*90/360 as r?