Final answer:
The student's question discusses the elements involved in evaluating the price of Tesla Inc. stock, focusing on volatility and the absence of dividends.
Step-by-step explanation:
The question provided pertains to the valuation of Tesla Inc. stock, which involves understanding investing in stocks. Stocks offer two forms of returns: dividends and capital gains. Tesla Inc., with a current stock price of $200 and not paying dividends, experiences an annual volatility of 20%. The annual risk-free interest rate is a constant 5%. Volatility and risk-free interest rates are essential in pricing stock options or understanding the potential movement in Tesla's stock price. As stocks can fluctuate widely over short periods, understanding these metrics helps investors anticipate potential returns on their investments.