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1. Suppose the price of a stock follows a geometric BM (G.B.M.) with mean rate of return = 0.24 per annum and volatility ^2 =

1. Suppose the price of a stock follows a geometric BM (G.B.M.) with mean rate of return = 0.24 per annum and volatility ^2 = 0.04 per annum. The current price of stock is S0 = 50.

(a) What is the probability that the stock price at the end of the next six months period will be higher than now at t = 0?

(b) Find E(S10).

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