Question: 2 Assume that S(0) = $35, a=0.06, sigma = 0.2, and delta = 0.02. What is the expected value of the continuously compounded three-year return

2 Assume that S(0) = $35, a=0.06, sigma = 0.2, and

2 Assume that S(0) = $35, a=0.06, sigma = 0.2, and delta = 0.02. What is the expected value of the continuously compounded three-year return if the stock is lognormally distributed? (a) Calculate an expression for the stock price after three periods, using Formula 18.20. (b) Calculate the expected value of the stock price after three years. (c) Calculate the median of the stock price after three years. 2 Assume that S(0) = $35, a=0.06, sigma = 0.2, and delta = 0.02. What is the expected value of the continuously compounded three-year return if the stock is lognormally distributed? (a) Calculate an expression for the stock price after three periods, using Formula 18.20. (b) Calculate the expected value of the stock price after three years. (c) Calculate the median of the stock price after three years

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