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The mean and standard deviation of the price

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Currently, shares of ABC Corp. trade at USD 100. The monthly risk neutral probability of the price increasing by USD 10 is 30%. And the probability of the price decreasing by USD 10 is 70%. What are the mean and standard deviation of the price after 2 months if price changes on consecutive months are independent?

 

 

 

Mean

 

 

Standard Deviation

 

 

a. 70

 

 

11.32

 

 

b. 70

 

 

12.96

 

 

c. 92

 

 

11.32

 

 

d. 92

 

 

12.96

 

 

 

 

Reference no: EM13658405

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