You are given the following information on a stock: Assume that the log returns are normally distributed.

Question:

You are given the following information on a stock:

Initial Price $25 Expected Annual Return per annum 8% Estimated Annual Volatility 20%

Assume that the log returns are normally distributed.

(a) Calculate the 95% prediction interval for the stock price in one year.

(b) Calculate the expected stock price and the standard deviation of the stock price in one year.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Derivative Pricing

ISBN: 9780367734213

1st Edition

Authors: Ambrose Lo

See More Books

Question Posted: Nov 22, 2023 08:18 AM

See More Questions

which one is correct The deduction for interest on educational loan is claimed as an itemized deduction. The deduction for the employer portion of self employment taxes is subject to a phase-out...
You are given the following information concerning a stock and the market: Calculate the average return and standard deviation for the market and the stock. Next, calculate the correlation between...
You are given the following information concerning a stock and the market: Calculate the average return and standard deviation for the market and the stock. Next, calculate the correlation between...
QUESTION 9 The output expression for an AND-OR-Invert circuit having one AND gate with inputs A, B and C and one AND gate with inputs D, E and Fis O(A+B+C)(D+E+F) O (A+B+C)(D+E+F) ABC + DEF...
Describe four situations in which the gross profit method of estimating inventory would be useful.
Kim is a 40% shareholder in Taupe Corporation, a calendar year S corporation. During 2018, Taupe had an operating loss of $200,000. If Kim has a basis of $50,000 in his stock and has made a loan to...
I:4-39 Prizes and Awards. For each of the following, indicate whether the amount is taxable: a. Peggy won $4,000 in the state lottery. b. Jane won a $500 prize for her entry in a poetry contest. c....
The Overstock-Grant Thornton dispute was publicly aired via disclosure statements filed with the SEC. What impact do you believe those disclosures had on the investing public's confidence in the...
In 2 0 2 4 , the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $ 1 0 , 0 0 0 , 0 0 0 . The road was completed in 2 0 2 6 . Information related...
Assume the Black-Scholes framework. You are given: (i) The stock, whose current price is 100, pays dividends continuously at a rate proportional to its price. (ii) The stocks volatility is 0.35....
This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulouslender. You want to borrow $25,000 for one year. The interest rate is 13.4...
Differentiate between capitalised costs and revenue costs
8-22. E.O.Q., Carrying cost = Storing cost + Interest. Following data are available with respect to a certain material. Annual requirement.......... Cost to place an order.. Annual interest rate. _...
A new company started production. Job 1 was completed, and Job 2 remains in production. Here is the information from the job cost sheets from their first and only jobs so far: Job 1 Hours Total Cost...
1 Evaluate the given limits using the 10. f(x) = (x-3)(x-5) (a) lim f(x) X-3 (b) lim f(x) x-3+ (c) lim f(x) X-3 graph of the function (d) lim f(x) x+5= (e) lim f(x) x+5+ (f) lim f(x) X-5 50 y -50 2 6...
In Year 1 , Stallman Co . had a break - even point of 8 0 , 0 0 0 units, a selling price of $ 1 9 per unit, and fixed costs of $ 2 0 0 , 0 0 0 . What is Stallman Co . s variable cost per unit? (...
What will be the output of following statements: int a = 3; if(a!= 3){ cout
Given a in R, consider the evaluation map Ea: Pn R defined in Example 3. (a) Show that Ea is a linear transformation satisfying the additional condition that Ea(xk) = [Ea(xk)] = holds for all k = 0,...
Refer to the table to answer the following questions. Year Nominal GDP (in billions) Total Federal Spending (in billions) Real GDP (in billions) Real Federal Spending (in billions) 2000 9,817 578...
If interest is 10%, what is A? 40 40 30 30 20 20 10
As shown in the cash flow diagram, there is an annual disbursement of money that varies from year to year from $100 to $300 in a fixed pattern that repeats forever. If interest is 10%, compute the...
On April 1 a man borrows $100. The loan is to be repaid in three equal semiannual (every 6 months) payments. If the annual interest rate is 7% compounded semiannually, how much is each payment?
Rocky Mountain Chocolate Factory (RMCF) founder and president Frank Crail employs 220 people in 361 outlets in the United States, Canada, United Arab Emirates, Japan, South Korea and Saudi Arabia. If...
Lakeland Inc. manufactured 2,500 units during the month of March. They incurred direct materials cost of $58,000 and overhead costs of $40,000. If their per-unit prime cost was $32.00 per unit, how...
The market price of a semi-annual pay bond is $979.86. It has 21.00 years to maturity and a yield to maturity of 7.34%. What is the coupon rate? Submit Answer format: Percentage Round to: 0 decimal...

You are given the following information on a stock: Assume that the log returns are normally distributed.

Question:

Initial Price $25 Expected Annual Return per annum 8% Estimated Annual Volatility 20%

Step by Step Answer:

a b As In S1 NIn 25 00...View the full answer

Derivative Pricing

Students also viewed these Business questions