What is probability that a european put option on the stock

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Reference no: EM131237527

A stock price follows geometric Brownian motion with an expected return of 16% and a volatility of 35%. The current price is $38.

(a) What is the probability that a European call option on the stock with an exercise price of $40 and a maturity date in 6 months will be exercised?

(b) What is the probability that a European put option on the stock with the same exercise price and maturity will be exercised?

Reference no: EM131237527

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