A stock is selling for $68.50. Interest rates are 6.0% and the returns on the stock have a standard deviation of 32.0%. What is the forecasted price of the stock using 3-month periods at S_uudu? A) $74.08 B) $94.24 C) $100.17 D) $111.12

Question

Quizplus · Accepted Answer

The forecasted price of the stock at S_uudu is calculated using the binomial model. The up and down factors are derived from the standard deviation and interest rate. After calculating the up and down movements over the 3-month period, the price at S_uudu is found to be $100.17.

A Stock Is Selling for $68