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Mathematics, 14.03.2020 02:57 hwhite41

The initial price of a stock is $100. Consider the following model for the movement of a stock’s price: at each second the price can increase by 0.05% with probability p or decrease by 0.05% with probability 1 − p (the probability for increase\decrease is independent of previous events). Approximate the probability that the stock’s price will be at least $105 after 1 hour, assuming 1. p = 0.51 and 2. p = 0.5. Is this model realistic?

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