Assume the Black-Scholes framework. You are given: (i) The stock, whose current price is 100, pays dividends
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Assume the Black-Scholes framework. You are given:
(i) The stock, whose current price is 100, pays dividends continuously at a rate proportional to its price.
(ii) The stock’s volatility is 0.35.
(iii) The continuously compounded expected rate of stock-price appreciation is 15%.
(iv) The continuously compounded risk-free interest rate is 12%.
Construct a 95% lognormal prediction interval for the price of the stock in 3 months.
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