The Current Share Price of Alcoa Is $70 and the Share

question 17

Multiple Choice

The current share price of Alcoa is $70 and the share does not pay dividends. The instantaneous risk free rate of return is 6%. The instantaneous standard deviation of Alcoa's shares is 40%. A put option on this share with an exercise price of $75 and an expiration date 30 days from now. According to the Black-Scholes OPM, you should hold ________ shares of stock per 100 put options to hedge your risk.

• A)30
• B)34
• C)69
• D)74

---

Definitions:

External Environment

The external environment of an organization includes all outside factors and forces that affect its operations, ranging from economic, socio-cultural, legal, technological, to political conditions.

Environmental Uncertainty

The extent to which an organization lacks information or control over the elements of its environment, affecting decision-making and strategy.

Opportunities

Chances or situations that can lead to the advancement or progress in a person's career, business, or other aspects of life.

Dynamic Environment

An ever-changing and evolving setting or situation, often used to describe rapidly changing business or technological landscapes.