Perfect market timer-according to black-scholes formula

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1. When her great niece Alexis is born, Great Aunt Florence deposits $25,000 in a 529 college savings account that compounded monthly at a rate of 6%. How much money will be in Alexa’s 529 account when she is ready to go to college 18 years from now?

2. Historical data suggest the standard deviation of an all-equity strategy is about 4.1% per month. Suppose the risk-free rate is now 1% per month and market volatility is at its historical level. What would be a maximum monthly fee to a perfect market timer, according to the Black-Scholes formula? (Round your answer to 2 decimal places.) Maximum monthly fee %

Reference no: EM131913712

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