GBM sample question

[sarita]

Dear David, may i bother you to help me solve the below. The answer is 3. many thanks.

Consider a stock that pays no dividends, has a vol of 30% per annum, and provide an expectd return of 15% per annum with continuous compounding. The stock prices follos GBM. Consider a time internval of 1week and the initial stock is 100, the hte stock price increase has a normal distribution with:

1) mean=.268, standard D=4.03
2) mean=.278, standard D =4.13
3) mean=0.288, standard D =4.16
4) mean= .288, standard D =4.27

 

[sarita]

Dear David, please ignore this question. I figured it out.

mean = .15* (1/52) =.288
standard D = .30 *sauare root of (1/52) = 4.16

many thanks,
S

 

[David Harper CFA FRM]

That i can do for you, no problem! David