A stock price is governed by the following process

dS = Sdt +Sdz where the expected return = 0.10 and the volatility = 0.2. The

current stock price is $1280.

1. What is the probability for the stock price to be higher than $1300 in one year time?

2. Suppose there is a call option written on this stock with a strike K = $1300 and maturity T = 1 year. The continuously compounded risk-free risk is 10%. What is the risk-neutral probability for the call option to be in-the-money?

3. Why is there a difference between the results in parts (a) and (b)?