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  3. suppose that the price of a share of a particular

Suppose that the price of a share of a particular stock listed on the New...

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Finance

Suppose that the price of a share of a particular stock listed on the New York Stock Exchange is currently $36. The following probability distribution shows how the price per share is expected to change over a three-month period.

Stock Price Change ($) Probability
2 0.05
1 0.10
0 0.27
+1 0.20
+2 0.18
+3 0.10
+4 0.10

(a)

Construct a spreadsheet simulation model that computes the value of the stock price in 3 months, 6 months, 9 months, and 12 months under the assumption that the change in stock price over any three-month period is independent of the change in stock price over any other three-month period. For a current price of $36 per share, what is the average stock price (in $) per share 12 months from now? (Use at least 1,000 trials. Round your answer to two decimal places.)

$

What is the standard deviation (in $) of the stock price 12 months from now? (Use at least 1,000 trials. Round your answer to two decimal places.)

$

(b)

Based on the model assumptions, what are the lowest and highest possible prices (in $) for this stock in 12 months?

lowest$

highest$

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