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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?

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Answer #1

This is solved using the black scholes equations.

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