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Determine the expected value

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Question - Assume the Black-Scholes framework. You are given:

1. S(t)S(t) is the stock price at time t.

2. The stock's volatility is 25%.

3. The continuously compounded expected rate of return is 8%.

4. The stock pays dividends continuously at a rate of 3% proportional to its price.

5. The continuously compounded risk-free interest rate is 4%.

6. The current stock price is S(0)=125S(0)=125.

Required - Determine the expected value of S(7).

Reference no: EM133144453

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