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

question 66

Multiple Choice

Find the input d₁ of the Black-Scholes price of a six-month call option on Japanese yen. The strike price is $1 = ¥100. The volatility is 25 percent per annum; r_$ = 5.5% and r_¥ = 6%.

• A)d₁ = 0.074246
• B)d₁ = 0.005982
• C)d₁ = $0.006137/¥
• D)None of the above

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Definitions:

Stock Price

The monetary value at which a company’s stock is traded on the market, influenced by factors like company performance and market conditions.

Premium

The amount by which the price of a bond or other security exceeds its principal amount or face value.

American Put Option

An American put option is a financial derivative that gives the holder the right, but not the obligation, to sell a specified quantity of an asset at a predetermined price before or on the option's expiration date.

Underlying Asset

The fundamental asset upon which financial derivatives and instruments, such as options and futures, are structured and valued.