Suppose that a stock price has an expected return of 16% per annum and a volatility of

Question:

Suppose that a stock price has an expected return of 16% per annum and a volatility of 30% per annum. When the stock price at the end of a certain day is $50, calculate the following:

(a) The expected stock price at the end of the next day.

(b) The standard deviation of the stock price at the end of the next day.

Oct 2017 Feb 2019 Aug 2019 Feb 2018 Aug 2018 Date Spot Price Mar 2018 Futures Price Sep 2018 Futures Price Mar 2019 Futu

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...