General Electric (GE) stock currently sells for 50 dollars a share. The risk free rate is...

 

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General Electric (GE) stock currently sells for 50 dollars a share. The risk free rate is 0% and the expected return on GE stock is also 0%.GE stock has a chance of either going up or down this year and by equalamounts if it does. If a one year European call option on GE of strike price 55 currently sells for 3 dollars, what is the volatility (standard deviation) ofthe return General Electric stock over the next year? The answer to this question is called the "implied volatility" of GE stock implicit in the price of the call option (which is a common way of quoting option prices). General Electric (GE) stock currently sells for 50 dollars a share. The risk free rate is 0% and the expected return on GE stock is also 0%.GE stock has a chance of either going up or down this year and by equalamounts if it does. If a one year European call option on GE of strike price 55 currently sells for 3 dollars, what is the volatility (standard deviation) ofthe return General Electric stock over the next year? The answer to this question is called the "implied volatility" of GE stock implicit in the price of the call option (which is a common way of quoting option prices).

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To find the implied volatility of General Electric GE stock based on the given information we need t... View the full answer