1. Suppose that So $100, i = 0.08, o 0.30, and that stock prices follow a Lognormal distribution. (a) What is P(St > $105) for t = 1? How does this probability change when you change t? How do you reconcile your answer with the fact that call option prices increase with time? (b) Let K = Soeit the risk-free future value at time t of So under continuous compounding at rate i. Compute P(St $105) for t = 1? How does this probability change when you change t? How do you reconcile your answer with the fact that call option prices increase with time? (b) Let K = Soeit the risk-free future value at time t of So under continuous compounding at rate i. Compute P(St