Can anyone show me how to answer this please?

A stock has beta of 2.0 and stock specific daily volatility of 0.04. Suppose that yesterday’s closing price was 95 and today the market goes up by 3%. What’s the probability of today’s closing price being at least 98?

  • $\begingroup$ Is this homework? $\endgroup$ – Louis Marascio Feb 11 '14 at 15:28
  • $\begingroup$ @LouisMarascio Feels like it! But no it is not. $\endgroup$ – ManInMoon Feb 11 '14 at 15:48
  • $\begingroup$ If it is not homework, perhaps you want to share some more information, else why not just go with this? 1-pnorm((<end>-<start>)/100,mean=E(r_stock),sd=(<beta>*<vola>)) $\endgroup$ – RndmSymbl Feb 11 '14 at 20:27
  • $\begingroup$ @RndmSymbl Could you show me the worked out numbers step by step pls. $\endgroup$ – ManInMoon Feb 12 '14 at 7:22
  • $\begingroup$ @ManInMoon this question is better asked here: math.stackexchange.com/questions/339572/… And I have improved the answer there. $\endgroup$ – RndmSymbl Feb 15 '14 at 18:05

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