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Problem 3. A stock price index at time t has the distribution according to the random variable where 2 has a standard normal distribution and
Problem 3. A stock price index at time t has the distribution according to the random variable where 2 has a standard normal distribution and time is measured in years. St :75 xexp[ut+o*t" [1/2)*Z) Parameter values are u = 0.1 and o = 0.3 and the stock index pays a continuous dividend at the rate 6 = 0.04. You invest $3,500 in the stock index at time 0 and your dividends are immediately reinvested in the stock index over the life of your investment [1) What is the probability that the oneyear total return on your investment is less than or equal to 40%? [i.e. what is the probability that you lose at least 10% on your initial investment over the year?) [2) What is the 0.10 percenle of your oneyear investment total return
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