The Black-Scholes Price of a Three-Month 50-Strike Put Option Is

question 21

Multiple Choice

The Black-Scholes price of a three-month 50-strike put option is $0.75.The stock is trading at $49.Given an interest rate of 2%,and no dividends,what is the implied volatility of the stock extracted from this option?

• A)0.55
• B)0.66
• C)0.77
• D)0.88

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Definitions:

Contingent Liability

A future financial liability that might occur based on the result of a particular event.

Contingent Liability

A potential financial obligation that may arise in the future, depending on the outcome of a specific event.

Future Event

A possible occurrence that may happen in the future, impacting strategies or decisions in various contexts.

Times Interest Earned

A financial ratio that measures a company's ability to cover its interest expenses on outstanding debt with its before-tax earnings, also known as the interest coverage ratio.