User Account

All Pages

Distribution of stock price

Assignment Help Finance Basics
Reference no: EM133062011

Distribution of Stock Price I

Consider a stock whose current stock price is $500 and its volatility is 35%. The risk-free interest rate is 5% per annum. The future stock price is log-normally distributed. Risk-averse investors require the stock return to be 10% per annum.

(a) What is the risk-neutral probability that stock price in year 2 is higher than $600?

(b) What is the real probability that stock price in year 2 is higher than $600?

Reference no: EM133062011

Questions Cloud

How much do they need to save each year : How much do they need to save each year (End of the period default) for the next 20 years to have this much money at a 8.5% interest rate
What is going on at american greetings : What is going on at American Greetings? Discuss the competitiveness of the industry.
Identify and record three of personal cash flows : Identify and record three of your personal cash flows. Because personal information is confidential, please use fictitious numbers.
Explain risk aversion in health care : Risk aversion is common to all living organisms. Explain risk aversion in health care. Since people are generally risk-averse
Distribution of stock price : Consider a stock whose current stock price is $500 and its volatility is 35%. The risk-free interest rate is 5% per annum.
How much did it transfer out of Work in Process : If Darden reported cost of goods sold totaling $246,000 in March, how much did it transfer out of Work in Process as completed goods
Compute the price of the bond : The market demands a return of 15% to invest in this bond. Zara Bond is sold at a redemption value of GHS100, at par with the face value.
Determine the acid-test ratio : The current assets consisted of $60,600 Cash; $41,500 Accounts Receivable; and $95,900 of Inventory. Determine the acid-test (quick) ratio
What will be the price of these bonds : If they receive an A? rating, the yield to maturity on similar A bonds is 10 percent. What will be the price of these bonds if they receive either an A or a AA?

Reviews

Write a Review

Finance Basics Questions & Answers

  Evaluate project and identify if it is worth buying

The discount rate used to evaluate such a business is 14.5%. The offer to purchase the business is $500,000. Evaluate this project and identify if it is worth

  How microbial diseases have changed human history

1. Describe how we define a microbe, and explain why the definition is a challenge.

  Jones soda estimates that its required return on stock

Jones Soda estimates that its required return on stock is 11.00 percent and the yield to maturity on its debt is 5.00 percent. The company's equity-to-asset ratio is 0.70 and the marginal tax rate is 20.00%. What is the company's weighted average cos..

  Proceeds and invest them for years

At the end of 5 years you take the proceeds and invest them for 12 years at 15 percent. How much will you have after 17 years?

  Constant-growth ddm model

GenGym just paid its annual dividend of $3 per share, and it is widely expected that the dividend will increase by 5% per year infinitely.  (a) What price should the stock sell at? The discount rate is 15%. (b) How would your answer change if the dis..

  Fbruary march and april of 6000 5000 5550 and 2000

a company is using the high-low method and has determined the following production for the months of january february

  Find the book value of pioneer net assets

Northern Equipment Corporation purchased all the outstanding common stock of Pioneer Equipment Rental for $5,500,000 in cash.

  What is the gain or loss on disposal of the asset

ACC 3100 - Prepare an amortization schedule covering the period 1/1/16 to 12/31/16 and What is the gain or loss on disposal of the asset?

  Adelaide qualified profit sharing plan

Adelaide qualified profit sharing plan

  Describe the stages of viral replication in animal cells

Describe the stages of viral replication in animal cells and indicate where DNA and RNA viruses replicate within the cell.

  Framework of evaluation of electronic brands

How to develop a personal framework of evaluation of electronic brands in terms of how well they implement their labor standards?

  What is the formula used and breakdown of the components

Assume an average return on your savings of 3 percent for five years. What is the formula used and breakdown of the components, in order to find the answer?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd