The S&P 500 Index Is Trading at a Level of 1200.The

question 29

Multiple Choice

The S&P 500 index is trading at a level of 1200.The rate of interest is 2%.The average rate of dividends for stocks in the index is 3%.Index volatility is 20%.What is the Black-Scholes price of a one-year at-the-money put option on the index?

• A)$98.90
• B)$99.10
• C)$99.20
• D)$99.25

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Definitions:

Logarithmic Equation

An equation involving logarithms of variables or constants, which can often be solved by using properties of logarithms.

Ln

The natural logarithm, which is the logarithm to the base \(e\), where \(e\) is an irrational and transcendental constant approximately equal to 2.71828.

Expression

A combination of symbols and numbers in mathematics that represents a quantity or relationship but does not include an equality sign.

Logarithmic Equation

A logarithmic equation is an equation that involves the logarithm of an expression equal to a value.