Question: Consider a continuous time framework where stock prices follow a GBM process. You observe a Stock X that currently trades at $45 per share, does

Consider a continuous time framework where stock prices follow a GBM process. You observe a Stock X that currently trades at $45 per share, does not pay dividends, and has a volatility of 20%. Suppose the riskless rate is 2% per annum (continuously compounded)

(i) What is the probability under the risk-neutral measure that this Stock X is worth at least $50/share one year from today?

(ii) What is the probability under the physical measure?

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