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Page 5 of 8 4. (12 points) The stock prices follow a lognormal distribution. You are given: (a) The continuously compounded annual rate of return
Page 5 of 8 4. (12 points) The stock prices follow a lognormal distribution. You are given: (a) The continuously compounded annual rate of return on the stock is 0.15. (b) The stock's volatility is o =0.3. (c) The continuously compounded annual dividend rate is d=0.02. (d) The current stock price So = 80. (i) Determine the probability that the stock price at the end of one month will be greater than its current price. (ii) Determine the partial expectation of the stock's price at the end of one month when it is less than the current stock price. (iii) Determine the 90% confidence interval for the stock price at the end of a month. Page 5 of 8 4. (12 points) The stock prices follow a lognormal distribution. You are given: (a) The continuously compounded annual rate of return on the stock is 0.15. (b) The stock's volatility is o =0.3. (c) The continuously compounded annual dividend rate is d=0.02. (d) The current stock price So = 80. (i) Determine the probability that the stock price at the end of one month will be greater than its current price. (ii) Determine the partial expectation of the stock's price at the end of one month when it is less than the current stock price. (iii) Determine the 90% confidence interval for the stock price at the end of a month
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