What is the expected value of price of stock after one year

Assignment Help Financial Management

Reference no: EM131603501

Consider a stock with S0 = 90, µ = .06, σ = .2. Use our continuous Black-Scholes model to answer the following. (a) What is the probability that the stock ends up below 80 after 1 year? (b) What is the probability that stock ends up above 110 after 2 years? (c) What is the expected value of the price of the stock after 1 year? (d) What is the expected compound rate of return for an investor buying this stock?

Reference no: EM131603501

Questions Cloud

Cost of retained earnings and the cost of new equity : What is the difference between the cost of retained earnings and the cost of new equity if the firm pays a $3 dividend with and expected growth rate of 8%.

What is average time from when box of novels arrives : What is the average time from when a box of novels arrives until shredding is complete (in hours)?

The components included in required rate of return on bond : An increase in the riskiness of a particular security would NOT affect? the components included in the required rate of return on a bond?

Use the multiple regression equation to predict : Use the multiple regression equation to predict the total body weight for a female athlete

What is the expected value of price of stock after one year : What is the expected compound rate of return for an investor buying this stock? What is the expected value of the price of the stock after 1 year?

Used instead of costs for specific sources of funds : The overall weighted average cost of capital is used instead of costs for specific sources of funds because?

Compute the required rate of return : Compute the required rate of return (Ke).

What would be the approximate after-tax cost of debt : What would be the approximate after-tax cost of debt for a new issue of bonds?

Stock price fall before you would get margin call : You have just purchased 100 shares of Ford Motor at $50 per share on margin. how far could the stock price fall before you would get a margin call?

User Account

All Pages