An Analyst Wants to Use the Black-Scholes Model to Value

question 6

Multiple Choice

An analyst wants to use the Black-Scholes model to value call options on the stock of Ledbetter Inc. based on the following data:
The price of the stock is $40.
The strike price of the option is $40.
The option matures in 3 months (t = 0.25) .
The standard deviation of the stock's returns is 0.40, and the variance is 0.16.
The risk-free rate is 6%.
Given this information, the analyst then calculated the following necessary components of the Black-Scholes model:
d1 = 0.175
d2 = -0.025
N(d1) = 0.56946
N(d2) = 0.49003
N(d1) and N(d2) represent areas under a standard normal distribution function. Using the Black-Scholes model, what is the value of the call option?

• A) $2.81
• B) $3.12
• C) $3.47
• D) $3.82
• E) $4.20

Understand safety precautions for starting and charging systems.

Identify and utilize the proper tools and tests for diagnosing starting and charging system issues.

Understand the electrical characteristics and requirements of starting and charging systems, including voltage and amperage.

Know the process for safely removing and installing components within starting and charging systems.

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Definitions:

Unionized Firms

Companies or organizations where a labor union represents the interests of the employees, negotiating wages, work conditions, and benefits on their behalf.

Foreign Competition

refers to the competitive pressure that domestic companies face from companies located in other countries.

Elastic Demand

A situation where the quantity demanded of a product changes significantly in response to changes in its price.

Competitive Levels

The degrees of competition within a market, characterized by the number of firms, product differentiation, and market entry or exit barriers.