Question

Question 2 A stock price has an expected return of 15% and a volatility of 25%....

Question 2
A stock price has an expected return of 15% and a volatility of 25%. It is currently $56.

2.1 What is the probability that it will be greater than $85 in two years?

2.2 What is the stock price that has a 5% probability of being exceeded in two years?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

This is solved using the black scholes equations.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
2.1 A stock price has an expected return of 15% and a volatility of 25%. It...
2.1 A stock price has an expected return of 15% and a volatility of 25%. It is currently $56. 2.1.1 What is the probability that it will be greater than $85 in two years? (4) 2 2.1.2 What is the stock price that has a 5% probability of being exceeded in two years? (2) 2.2 A binary option pays off $150 if a stock price is greater than $40 in three months. The current stock price is $35 and its...
A stock fund has an expected return of 15% and a standard deviation of 25% and...
A stock fund has an expected return of 15% and a standard deviation of 25% and a bond fund has an expected return of 10% and a standard deviation of 10%. The correlation between the two funds is 0.25. The risk free rate is 5%. What is the (a) expected return and (b) standard deviation of the portfolio with 70% weight in the stock portfolio and 30% weight in the bond portfolio?
A spot price of an asset has an expected return of 16% and a volatility of...
A spot price of an asset has an expected return of 16% and a volatility of 35%. The current price is $38. What is the probability that a European call option on the asset with an exercise price of $40 and a maturity date in six months will be exercised? What is the probability that a European put option on the asset with the same exercise price and maturity will be exercised?
Q1) A stock fund has an expected return of 15% and a standard deviation of 25%...
Q1) A stock fund has an expected return of 15% and a standard deviation of 25% and a bond fund has an expected return of 10% and a standard deviation of 10%. The correlation between the two funds is 0.25. The risk free rate is 5%. What is the (a) expected return and (b) standard deviation of the portfolio with 70% weight in the stock portfolio and 30% weight in the bond portfolio? Q2) The variance of Stock A is...
Suppose a stock has an expected return of 10% per year and a return volatility of...
Suppose a stock has an expected return of 10% per year and a return volatility of 28% per year and equally likely transitions (i.e. with probability 1/2). The risk-free rate is 4% per year. The stock has a current price of $100 and has declared dividends of $2.04 to be paid at the end of each six-month period. Construct a binomial model for the stock price of ABC with 2 semi-annual periods. Find the value of a European call option...
A stock’s current price S is $100. Its return has a volatility of s = 25...
A stock’s current price S is $100. Its return has a volatility of s = 25 percent per year. European call and put options trading on the stock have a strike price of K = $105 and mature after T = 0.5 years. The continuously compounded risk-free interest rate r is 5 percent per year. The Black-Scholes-Merton model gives the price of the European put as: please provide explanation
TSLA stock price is currently at $800. The stock return has an annualized volatility (sigma) of...
TSLA stock price is currently at $800. The stock return has an annualized volatility (sigma) of 70%. The stock does not pay dividend and assume zero interest rate. Compute the Black-Merton-Scholes delta on a 6-month European call option on TSLA with a strike of $1000.
TSLA stock price is currently at $800. The stock return has an annualized volatility (sigma) of...
TSLA stock price is currently at $800. The stock return has an annualized volatility (sigma) of 70%. The stock does not pay dividend and assume zero interest rate. Compute the Black-Merton-Scholes delta on a 6-month European call option on TSLA with a strike of $1000.
Assume that the expected return of the U.S. stock market is 10% and the volatility is...
Assume that the expected return of the U.S. stock market is 10% and the volatility is 20%. Suppose that, instead of buying stocks, I choose to short-sell stocks all the time. What would be the expected return and volatility of my strategy? I know the answer to this question was solved already but it is still really confusing. Can someone else try to explain everything a little more clearly. Thanks
Assume that the risk-free rate rf is equal to 2%, the market expected return is equal...
Assume that the risk-free rate rf is equal to 2%, the market expected return is equal to 10%. Stock RGB has a volatility of 15% and a beta of 1.2. Stock SHC has a volatility of 25% and a beta of 0.7. Please mark the only FALSE statement: a. the expected return of RGB is equal to 11.6% b. the expected return of SHC is equal to 7.6% c. SHC stock has more market risk than RGB d. SHC stock...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT