An investor is considering whether to invest in shares of Stock ABC or risk-free bonds. The...

 

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An investor is considering whether to invest in shares of Stock ABC or risk-free bonds. The stock pays dividends continuously at a rate of 1%, has an expected annual yield of 9%, and has a volatility of 24%. The continuously compounded risk-free rate is 1.8%. Assuming that prices for Stock ABC follow a lognormal distribution, calculate the probability that an investment of X in Stock ABC would be worth less than an investment of X in risk-free bonds after 5 years. [DM 05c 02] 0.3975 0.4353 0.4164 0.3785 O 0.3596 An investor is considering whether to invest in shares of Stock ABC or risk-free bonds. The stock pays dividends continuously at a rate of 1%, has an expected annual yield of 9%, and has a volatility of 24%. The continuously compounded risk-free rate is 1.8%. Assuming that prices for Stock ABC follow a lognormal distribution, calculate the probability that an investment of X in Stock ABC would be worth less than an investment of X in risk-free bonds after 5 years. [DM 05c 02] 0.3975 0.4353 0.4164 0.3785 O 0.3596

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