Explain the given statement

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1. ‘‘For a dividend-paying stock, the tree for the stock price does not recombine; but the tree for the stock price less the present value of future dividends does recombine.'' Explain this statement.

2. Show that the probabilities in a Cox, Ross, and Rubinstein binomial tree are negative when the condition in footnote 9 holds.

Reference no: EM131239449

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