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

question 171

Multiple Choice

In the Black-Scholes call option pricing model, N(d1) is the probability that:

• A) A standardized, normally distributed random variable is less than or equal to d1.
• B) A standardized, normally distributed random variable is greater than or equal to d1.
• C) The call will finish in the money.
• D) The call will finish out of the money.
• E) The call will finish at the money.

---

Definitions:

Carrying Cost

Carrying cost refers to the total cost of holding inventory, which includes warehousing, handling, depreciation, opportunity costs, and insurance.

Carrying Costs

Costs that rise with increases in the level of investment in current assets.

Average Inventory

The mean value of inventory over a certain time period, used for inventory management and planning.

Carrying Cost

The total cost of holding inventory, including storage, insurance, and obsolescence.