Chapter 13: 5-Steps

In the summary, page 29:

episilon_t = E_t - phi.D_t

shouldnt this be epsilon_(t+1) instead of t ?

 

Does this has anything to do with the solution to 13.15 where the epsilon_2 = epsilon_1?

also notice that phi_1 = phi_2

 

Question 13.15

when i try to calculate epsilon using the formula:

epsilon = exp(-r) (Cd.u - Cu.d)/(u - d)

I could only get the answer -40.7176 if exp(-2r) was used instead. Does this means that there should be a t exponent and that it represents the time steps, and not length of the step?

 

anyone sick of reading about the 5-steps yet?

this must be the longest 5 steps i ever have to follow