Past exam of the short options paper shared by Prelims and Parts A and B of the physics course of the University of Oxford / 2012 / S9 / 3 / b

The one-step expected price multiplier under the stated physical probability is $1.1p+0.9(1-p)=0.9+0.2p$. Independence lets the expectation of the product factorize, givingThe same expression follows by summing the four binomial endpoint probabilities times their prices. This is a physical-measure expectation; option replication below uses a separately determined risk-neutral probability.