Solution-
Formula of lognormal distribution is given as below-
(A) In first part, we have T = 6, u = 0.15, sigma = 0.3 and S0 = 40
So, Expected value of log(stock price) = Ln(40) + (0.15-0.3*0.3/2)*6
= 4.319
Thus, average stock price is = e^()
= 75.10
(B) After 4 years-
the average lognormal stock price is- Ln(40) + (0.15-0.3*0.3/2)*4
=4.109
After 4 years-
the average lognormal stock price is- Ln(40) + (0.15-0.3*0.3/2)*2/12
= 3.706
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