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Assume the Black-Scholes framework. You are given: Question Assume the Black-Scholes framework. You are...

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Finance

Assume the Black-Scholes framework. You are given:image

Question Assume the Black-Scholes framework. You are given: i. S(t) is the stock price at time t. ii. The stocks volatility is 25%. iii. The continuously compounded expected rate of return is 8%. iv. The stock pays dividends continuously at a rate of 3% proportional to its price. The continuously compounded risk-free interest rate is 4%. vi. The current stock price is S(0) = 125. Calculate Pr (S (4) > E (S (4)]). V. Possible Answers A 0.3 B 0.4 0.5 D 0.6 E 0.7 Question Assume the Black-Scholes framework. You are given: i. S(t) is the stock price at time t. ii. The stocks volatility is 25%. iii. The continuously compounded expected rate of return is 8%. iv. The stock pays dividends continuously at a rate of 3% proportional to its price. The continuously compounded risk-free interest rate is 4%. vi. The current stock price is S(0) = 125. Calculate Pr (S (4) > E (S (4)]). V. Possible Answers A 0.3 B 0.4 0.5 D 0.6 E 0.7

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