You have a stock trading at $100. The stock follows a lognormal distribution: with drift of 20% and volatilty of 30%. The risk free rate is 2%. What is the risk-neutral probability for a 3- month 100 put to expire in the money? Find N(-d2). Compare the results.

Q: (a) An investor is considering a stock worth Rs.555 per share today that pays a 9% annual dividend…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: A stock is trading at $80 per share. The stock is expected to have a year-end dividend of $4 per…

A: Formula for current price of the stock is: Current price = Expected dividend / (required return -…

Q: The current spot price of a stock is $100, the expected rate of return of the stock is 8%, and the…

A: Current spot price = $100 Expected rate of return = 8% Volatility = 5% Risk-free rate = 3% Time…

Q: For a stock, you are given: i) The current stock price is 70 in) The stock will pay dividend…

A: The binomial tree approach of pricing options is used to price American options. An American option…

Q: Suppose that you are a trader at the stock market.T-Mobile’s stocks currently trade at $45 and the…

A: SOLUTION:- Yes, the expectations of the trader will optimal or favourable because if the information…

Q: A stock is expected to pay a dividend of $0.75 at the end of the year (i.e., D1 = $0.75), and it…

A: Pricen = Dividendn+1 / ( Required rate - Growth rate )

Q: A stock is trading at $80 per share. The stock is expected to have a year-end dividend of $4 per…

A: The growth rate can be referred to as the return expected by the investors from an investment…

Q: Diddy Corp. stock has a beta of 1.1, the current risk-free rate is 5 percent, and the expected…

A: The cost of equity can be calculated as per CAPM equation

Q: A stock is currently trading at $57 and we assume a three-period binomial tree model where each…

A: The following flow chart shows the price up and drop in the stock :

Q: Suppose a non-dividend paying stock is trading at $175 per share and has a volatility of 45%. What…

A: Binomial Option pricing model is a tool which helps in valuing an option and as compred to Black…

Q: You expect the risk-free rate (RFR) to be 3 percent and the market return to be 10 percent. You also…

A: Using CAPM

Q: For a stock, you are given: i. The current stock price is 90 ii. The stock pays dividends…

A: Here, Current Stock Price is 90 Dividend Yield is 2% Stock Volatility is 20% Time Period is 9 months…

Q: A stock is expected to pay a dividend of $1.27 at the end of the year. The required rate of return…

A: Formula: Current stock price = Expected dividend / (Required return - Growth rate)

Q: A stock is expected to pay a dividend of $0.50 at the end of the year (i.e., D1 = $0.50), and it…

A: Expected Dividend (D1) = $0.50 Dividend growth rate (g) = 4% Required Rate of Return (R) = 12%…

Q: A stock with a beta of 1.2 has an expected rate of return of 14%. If the market return this year…

A: Stock return = Expected rate of return + beta (Market premium)

Q: If the volatility of a non-dividend paying stock is 35% per annum and a risk-free rate is 4% per…

A: d is the ratio of expected price in next time period to price of previous period for the down side…

Q: Consider a stock with an initial price of $40, an expected return of 16% per annum, and a volatility…

A: Initial price = $40 Expected return =16% per annum Volatility = 20% per annum

Q: Suppose that today's price of ABC stock is $100 and it is known that price moves up or down by a…

A: Given   here   annual variance of the underlying stock prices is 36%,   Volatality is square root…

Q: The risk-free rate of return, rRF, is 11 percent; the required rate of return on the market, rM, 14…

A: This question require us to compute the value of stock. As per Dividend Discount model: Value of…

Q: A stock with a beta of 1.8 has an expected rate of return of 16%. If the market return this year…

A: Expected rate of return is 16%. When market return turns out to be 6% below expected, then the…

Q: stock is expected to pay a dividend of $1.50 at the end of the year (i.e., D1 = $1.50), and it…

A: In this we have to use dividend discount model to calculate the price of stock.

Q: Blast! stock has a beta of 1.4 and is currently selling for $16. Your DCF analysis indicates that…

A: GIVEN, beta = 1.4 current price (p0) = $16 p1=$18.5 dividend (d1) = $1 risk free rate ( rf) = 5%…

Q: A stock is expected to pay a dividend of $1.00 at the end of the year (i.e., D1 = $1.00), and it…

A: Next dividend (D1) = $1 Growth rate (g) = 0.09 Required return (r) = 0.14 Stock's expected price 2…

Q: A stock is expected to pay a dividend of $1.00 at the end of the year (i.e., D1 = $1.00), and it…

A: Next dividend (D1) = $1.00 Growth rate (g) = 10% Dividend after 5 years (D5) = D1*(1+g)4…

Q: A stock is expected to pay a dividend of $1.75 at the end of the year (i.e., D1 = $1.75), and it…

A: Using dividend discount model

Q: You expect the risk-free rate (RFR) to be 3 percent and the market return to be 10 percent. You also…

A: If Capital Asset Pricing Model hold good Required Return = Risk Free rate + (market Return - Risk…

Q: A stock is expected to pay a dividend of $1.00 at the end of the year (i.e., D1 = $1.00), and it…

A: FORMULA  Stock's expected price 4 years from today = D5/(i-g) Where D5 - Dividend after 5 years from…

Q: need help

A: Risk-free Rate = 5% or 0.05Expected Market Rate of Return = 20% or 0.2Beta = 1 Calculation of…

Q: The​ risk-free rate is 3.7% and you believe that the​ S&P 500's excess return will be 11​% over the…

A: CAPM or Capital Asset Pricing Model is the formula that represents the relationship between the…

Q: A stock with a beta of 0.9 has an expected rate of return of 10%. If the market return this year…

A: The question can be answered by determining the return for the stock using the capital asset pricing…

Q: A stock is expected to pay a dividend of $1.99 at the end of the year. The required rate of return…

A: As per the  dividend discount model , the value of the company stock is the instrinsic value or the…

Q: A stock is expected to pay a dividend of $2.25 at the end of the year (i.e., D1 = $2.25), and it…

A: Expected dividend (D1)= $2.25 Growth rate (g) = 8% Required return (r) = 12%

Q: Consider a stock where the current price is Ksh.120, the expected return is 20% per annum, and the…

A: The question is based on the concept of  probability distribution over a year in continuous…

Q: A stock's initial value was $ 15 and the value after two years is $25. a. Find out the holding…

A: Given: Initial Value = $15 Value after 2 years = $25 Number of period = 2 Holding period return…

Q: Suppose that three stocks (A, B, and C} and two common risk factors (1 and 2) have the following…

A: We have:E(rA) = (1.1)A1 + (0.8)A2E(rB) =(0.7)A1+(0.6)A2E(rC) =( 0.3)A1+(0.4)A2A1 = 4%A2 = 2%

Q: What is the price of the stock today?

A: Share price: It represents the current worth to the sellers and buyers of stock and can be…

Q: The current price of a stock is ₱100 and has volatility (σ) of 0.25. The continuous risk free rate…

A: Long position: It is a position in a contract in which a party buys the contract.Short position: It…

Q: A stock has a beta of 1.04, the expected return on the market is 10 percent, and the risk- free rate…

A: Cost of equity: It can be defined as the rate of return that is provided by the company to its…

Q: The rate on six-month T-bills is currently 5%. Andvark Company stock has a beta of 1.69 and a…

A: Risky stock is a stock which has higher risk as compared to the risk on the market portfolio. A…

Q: You expect an RFR of 9 percent and the market return (RM) of 14 percent. Compute the expected return…

A: Financial statements are statements which states the business activities performed by the company .…

Q: A stock is expected to pay a dividend of $2.75 at the end of the year (i.e., D1 = $2.75), and it…

A: The below expression can be used to calculate dividend in year 2. The dividend after 1 year is…

Q: The risk-free rate is 4% and the expected market return is 10%. A stock with a  beta of 0.9 is…

A: The dividend discount model says that fair value or intrinsic value of a stock today is the present…

Q: For a stock, you are given: i. The current stock price is 90 ii. The stock pays dividends…

A: Current Stock price is 90 Dividend yield is 2% Risk free rate is 100% Volatility is 20% Total number…