A Stock Is Trading at 100 $u = 1.20$ And $d = 0.80$

A stock is trading at 100.Consider a two-period binomial model in which the stock price moves up or down each period by factors $u = 1.20$ and $d = 0.80$ ,respectively.The gross risk-free rate of interest per time step is 1.04.You are long a cash-or-nothing digital call option that pays $100 if $S _ { T } \geq 100$ ,and nothing otherwise;and short a cash-or-nothing digital put option that pays $100 if $S _ { T } \leq 100$ ,and nothing otherwise.(Here, $S _ { T }$ is the stock price at the end of two periods. ) The value of your portfolio is

A) Positive.
B) zero.
C) Negative.
D) Cannot be calculated from the given information.

Correct Answer:

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