the current stock price is $95

The standard deviation is 0.35

There will be dividends of 3.25% of the stock price whether it goes up or down in periods 1 and 3.

The risk free rate is 4.00% per year.

How will your analysis change if the standard deviation is increased to 0.50?

1. Having performed your calculations and your analysis, are there any opportunities you can identify that you can take advantage of as an investor?
2. Describe a strategy that you would like to implement and/or a portfolio that you can form that can yield attractive returns
3. Describe the benefits and risks of the strategy/ies that you would like to implement
4. Without actually doing the calculations, are you able to perform a similar kind of analysis using the Black-Scholes-Merton model instead of the Binomial Option Pricing model? What are the advantages and disadvantages of using one over the other?Mention some of the limitations of each model in answering the above questions.

Answer rating: 100% (QA)

If the standard deviation is increased to 050 the increased volatility in stock prices would lead to ... View the full answer