Question: In this chapter, assume the log-normal model. Unless otherwise stated, assume no arbitrage opportunities The current spot price of a stock is $36.00, the

In this chapter, assume the log-normal model. Unless otherwise stated, assume no

In this chapter, assume the log-normal model. Unless otherwise stated, assume no arbitrage opportunities The current spot price of a stock is $36.00, the expected rate of return of the stock is 7.6%, and the volatility is 15%. The risk-free rate is 5.8%. Compute the price of a derivative whose payoff in 16 months is - In (S5) + $0.537 Where S denotes the stock price in 16 months. Enter your solution as a dollar value, including dollar symbol (S), to two decimal places.

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