The prices of stocks or other financial instruments are often modeled with a lognormal distribution. An investor

Question:

The prices of or other financial instruments are often modeled with a lognormal distribution. An investor is considering purchasing stock in one of two companies, A or B. The price of a share of stock today is $1 for both companies. For company A, the value of the stock one year from now is modeled as lognormal with parameters μ = 0.05 and σ = 0.1. For company B, the value of the stock one year from now is modeled as lognormal with parameters μ = 0.02 and σ = 0.2.
a. Find the mean of the price of one share of company A one year from now.
b. Find the probability that the price of one share of company A one year from now will be greater than $1.20.
c. Find the mean of the price of one share of company B one year from now.
d. Find the probability that the price of one share of company B one year from now will be greater than $1.20.
Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...