Given That D1 = 1

question 251

Multiple Choice

Given that d1 = 1.50 in the Black-Scholes formula, the time to expiration of a call option is two months, the risk-free rate is 6% per year, and the standard deviation of returns on the shares
Underlying the call option is 20%. What is the value of d2 if the exercise price is $28 and the stock
Price is $31.23?

• A) 1.42
• B) 1.48
• C) 1.50
• D) 1.58

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Definitions:

Grapevine

An informal communication network within an organization, where information is often passed through word of mouth.

Communication Work

The effort or activity involved in conveying information or expressing ideas effectively, especially in professional settings.

ERG Theory

A refinement of Maslow’s hierarchy that includes only three needs areas: existence (mostly figure needs); relatedness (needs linked to relationships); and growth (internal esteem needs and self-actualization).

Existence

The state or fact of living, being, or having a presence.