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Problem 1 Assume the Black-Scholes framework. You are given: The stock, whose current price is 100, pays dividends continuously at a rate propor- tional

Problem 1 Assume the Black-Scholes framework. You are given: The stock, whose current price is 100, pays dividends continuously at a rate propor- tional to its price. The stock's volatility is 0.35. The continuously compounded expected rate of stock-price appreciation is 15%. The continuously compounded risk-free interest rate is 12%. Construct a 95% lognormal prediction interval for the price of the stock in 3 months.

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