In the Black-Scholes Option Pricing Formula, N(d1) Is the Probability

question 404

Multiple Choice

In the Black-Scholes option pricing formula, N(d1) is the probability that a standardized, normally distributed random variable is:

• A) Less than or equal to N(d2).
• B) Less than one.
• C) Equal to one.
• D) Equal to d1.
• E) Less than or equal to d1.

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Definitions:

Marginal Product

The increase in output that arises from an additional unit of input, holding all other inputs constant.

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Electrical cables used to connect appliances and electronic devices to the main electricity supply in order to power them.

Fifth Worker

An example used in economics to illustrate the principle of diminishing returns, where the addition of a fifth worker may lead to a lesser increment in output than the fourth.

Marginal Product

The additional output that can be produced by adding one more unit of a specific input, keeping all others constant.