Find the Input D₁ of the Black-Scholes Price of a Six-Month

question 13

Multiple Choice

Find the input d₁ of the Black-Scholes price of a six-month call option written on €100,000 with a strike price of $1.00 = €1.00.The current exchange rate is $1.25 = €1.00; The U.S.risk-free rate is 5% over the period and the euro-zone risk-free rate is 4%.The volatility of the underlying asset is 10.7 percent.

• A)d₁ = 0.103915
• B)d₁ = 2.9871
• C)d₁ = 0.0283
• D)none of the options

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Definitions:

Incurred Expense

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Incurred

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