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Show all work so I can learn. Thanks! Assume the Black-Scholes framework. You are given: S(t) is the stock price at time t. The stocks
Show all work so I can learn. Thanks!
Assume the Black-Scholes framework. You are given:
- S(t) is the stock price at time t.
- The stocks volatility is 25%.
- The continuously compounded expected rate of return is 8%.
- The stock pays dividends continuously at a rate of 3% proportional to its price.
- The continuously compounded risk-free interest rate is 4%.
- The current stock price is S(0)=125.
Determine the probability that S(10) is less than its median.
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