Consider the binomial asset pricing world where at time t = 0, a
share of stock costs S0 = 50. At time t = 1, we flip a coin, and the stock is worth
S1(H) = 100 or S1(T) = 50 if heads or tails occurs respectively. Assume the
probability of heads is p = 1/2. If the risk-free interest rate is r = 0.1, what is
the equity premium?