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Suppose that the share price of company B is currently trading at £20 on the London Stock Exchange. The annual share price evolves according to a geometric Brownian motion with drift parameter µ = 0.7 and volatility parameter σ = 1.2. Suppose also that the continuously compounded interest rate is 4%.
(a) What is the share price at time t, S(t), equal to, under the above assumptions? [2]
(b) Find the probability that after 5 weeks the share has at least doubled its value. [4]
(c) What would change in the evolution of the share price, if it followed the risk-neutral [2] geometric Brownian motion?
(d) Suppose that there exists a European call option written on the share price of [2] company B with strike price K and and maturity time T. Write down the BlackScholes formula for the price of this option.
(e) What is the probability that you will exercise this call option with strike price [5] K = £22 at maturity T = 4 months?
Sir Yvanna Samanta invest 10, 000FCFA in a fund with a monthly rate of 1%. After 12months she will receive?
) Mohit deposited Rs. 1,00,000 in a bank for 3 years offering interest rate of 6% compounded half- yearly during first year, at the rate of 12% compounded quarterly during second year and at 10% compounded continuously during third year. Find his balance after 3 years.
Mohit deposited Rs. 1,00,000 in a bank for 3 years offering interest rate of 6%
compounded half- yearly during first year, at the rate of 12% compounded quarterly
during second year and at 10% compounded continuously during third year. Find his
balance after 3 years.
Find the lump sum deposit which will give $3,092 in 10 years in an account paying 5.01% compounded quarterly.
The balance in an account grew from $5,032 to $12,145 in 15 years, when interest was compounded quarterly. What was the interest rate?
Tom deposited $5,544 into a savings account paying 8.2% interest compounded monthly. Find the balance after 8 years.
Find the number of years needed for a $3,470 deposit to grow to $4,611 when interest is 5.35% compounded daily.
Find the lump sum deposit which will give $9,430 in 10 years in an account paying 1.24% compounded monthly.
Southwest Dry Cleaners believes that it will need equipment in 10 yeas. The equipment will cost 26,000. What lump sum should be invested today at 6% compounded semiannually to yield $26,000?
#340153 on Dec 2023