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A stock price follows geometric Brownian motion with an expected return of 16% and a volatility of 35%. The current price is $38. (a) What
A stock price follows geometric Brownian motion with an expected return of 16% and a volatility of 35%. The current price is $38. (a) What is the probability that a European call option on the stock with an exercise price of $40 and a maturity date in 6 months will be exercised? (b) What is the probability that a European put option on the stock with the same exercise price and maturity will be exercised?
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