Question
A stock is now selling at $300 per share. Over the next year the probability that the stock price will increase on any one day
A stock is now selling at $300 per share. Over the next year the probability that
the stock price will increase on any one day is 40%. The probability that the stock
price will decrease on any one day is 60%. If the stock increases, the amount of
the increase will be exactly $2. If the stock decreases, the amount of the
decrease will be exactly $1. The price movements are independent from day to
day. The stock price movements are observed over the next 5 trading days.
What is the probability that the stock price will be above $300 at the end of this period of time?
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