A Call Option with an Exercise Price of $50 Expires

question 27

Multiple Choice

A call option with an exercise price of $50 expires in six months, has a stock price of $54, and has a standard deviation of 80 percent.The risk-free rate is 9.2 percent per year annually compounded.Calculate the value of d1.

• A)0.3
• B)0.7214
• C)-0.7214
• D)0.4967

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Definitions:

Pricing

The method of determining the value at which a product or service will be sold to consumers.

Transfer Pricing

Pertains to the pricing of goods, services, and intellectual property when these are exchanged between companies under a common control, affecting tax liabilities and financial results.

Division Charges

Fees or costs allocated to separate departments or divisions within a company for internal accounting or budgeting purposes.

Premium Pricing

A strategy where goods or services are priced higher than the market average to create a perceived value of higher quality or exclusivity.