 Risk-neutral probability in a binomial market

The martingale condition for the discounted stock is $qu{S}_0+(1-q)d{S}_0=R{S}_0$. Therefore the up risk-neutral probability isWith down factor $d=1+a$, up factor $u=1+b$ and $R=1+r$, this is equivalently $(r-a)/(b-a)$. For $d=0.8$, $u=1.2$, $R=1.05$, it gives $q=0.25/0.4=0.625$. Under the risk-neutral measure, the terminal stock price has expected value $(5/8)120+(3/8)80=105$, whose discounted value is 100. The physical probability $p$ need only satisfy $0<p<1$; it does not enter this calculation.