Question: The stock return is distributed with = 16% per annum, = 20% per annum, S0 = 40, T = 0.5. What is mean and variance

The stock return is distributed with = 16% per annum, = 20% per annum, S0 = 40, T = 0.5. What is mean and variance of ln(ST/So)?

Select one:

a. 3.76, 0.02

b. 0.07,0.02

c. 0.02,0.02

d. 0.14, 0.04

e. 3.76, 0.04

The answer is b. 0.07, 0.02 but how do we get to these figures?

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