CUMULATIVE NORMAL DISTRIBUTION TABLE

question 20

Multiple Choice

CUMULATIVE NORMAL DISTRIBUTION TABLE
-Refer to the information above. A stock is currently selling for $42. The stock pays no dividends. An American call option on the stock has a strike price of $45 and has 6 months to
Expiration. The standard deviation of the continuously compounded rate of return of the stock
Is 25%, and the annualized risk-free rate is 3%. Use the Black-Scholes formula to calculate the
Fair value of this option.

• A)$2.33
• B)$2.01
• C)$2.25
• D)The Black-Scholes formula cannot be used to determine the fair value of an American call option.

Understand and calculate values based on proportional relationships.

Analyze and solve problems involving repeating and terminating decimals.

Determine the effect of percentage changes on values.

Convert mixed numbers to decimals and percentages.

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Definitions:

Seasonal Indexes

Quantitative measures that adjust data for recurring seasonal effects to better understand underlying trends.

Motor Oil Sales

The volume or amount of motor oil sold within a specific period.

Centered Moving Averages

A method used in time series analysis to smooth out short-term fluctuations and highlight longer-term trends or cycles by averaging data points in the middle of a set time window.

Quarterly Sales

The total sales revenue generated by a company or entity within a three-month period.