Suppose the simple weekly return of a stock is independently and identically log-normally distributed with parameters μ = 0

Economics Sep 09, 2020

Suppose the simple weekly return of a stock is independently and identically log-normally distributed with parameters μ = 0.2 and σ = 0.4. What is the probability that the price of the stock will be lower next week?

Select one:

A. 0.0952

B. None of these

C. 0.3085

D. 0.5000

E. 0.6915

Expert Solution

Answer. C] 0.3085

Log normal distribution is also called Galton distribution or Galton's distribution. A continuous probability distribution of a random variable whose logarithm is normally distributed.

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