A Stock Is Currently Selling for $28 a Share

question 235

Multiple Choice

A stock is currently selling for $28 a share. The risk-free rate is 4.5 percent and the standard deviation is 35 percent. What is the value of d₁ of a 3-month call option with a strike price of $25?

• A) .4207
• B) .5413
• C) .6488
• D) .7479
• E) .7994

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Definitions:

Positive Profits

When a company or business generates earnings that exceed its costs and expenses, resulting in a net gain.

Market Price

The prevailing rate at which a good or service is available for purchase or sale on the open market.

Profit-maximizing

The process by which a firm chooses its production level and pricing to achieve the highest possible profit given its cost structure and market demand.

Profit

The financial gain made in a transaction or operation, calculated as the difference between revenue and costs.