Construct a binomial tree to describe stock price movement.
B is correct. Across two periods, there are four possibilities:
·an up move followed by an up move ($96.8 end value),
·an up move followed by a down move ($79.2 end value), 
·a down move followed by an up move ($79.2 end value), and
·a down move followed by a down move ($64.8 end value).
The probability of an up move followed by a down move is 0.75 × 0.25 = 0.1875.
The probability of a down move followed by an up move is 0.25 × 0.75 also = 0.1875. Both of these sequences result in an end value of $79.2.
Therefore, the probability of an end value of $79.2 is (0.1875 + 0.1875) = 37.5%.