An analyst on the fixed-income desk of an investment bank is calculating the risk-neutral probabilities of upward or downward movements in interest rates at various nodes in a zero-coupon bond price tree. The analyst constructs an interest rate tree of semi-annual spot interest rates quoted on an annualized basis, and a price tree, both with semi-annual time steps, as shown below (t in years): ``` t = 0 t = 0.5 t = 1 3.50% 4.00% 4.50% / \ / \ / \ / \ 0.70 0.30 3.50% 2.50% ``` ``` t = 0 t = 0.5 t = 1 t = 1.5 P(1,1) 978.00 1000 / \ / \ q 1-q 982.80 1000 / \ / \ 945.80 → P(1,0) 987.65 1000 ``` What is the risk-neutral probability of the upward movement labeled q? | Financial Risk Manager Part 2 Quiz - LeetQuiz