Te mean rate of return on a stock is estimated at 20


The mean rate of return on a stock is estimated at 20% while the volatility is 40%: The risk free interest rate is 5%:

(a) What is the mean for the log price relative?

(b) Construct the .nal stock prices for a 10 period one year tree.

(c) Construct the statistical probabilities for these stock prices

(d) Construct the associated risk neutral probabilities.

Request for Solution File

Ask an Expert for Answer!!
Finance Basics: Te mean rate of return on a stock is estimated at 20
Reference No:- TGS01071632

Expected delivery within 24 Hours