 2023

Source: released examination PDF, pages 252–255. Solutions follow the numbering of the 6 June 2023 paper. Throughout, volatility is positive and the stated Black-Scholes model assumptions apply. The finite perpetual values in 2(b) additionally require $r>0$; the other interest-rate cases are explained below. Question 3's conditional expectation is evaluated under the measure stipulated there, with its financial interpretation qualified in 3(d).