When the Time Period Is in Days, Such as 56

question 29

Multiple Choice

$\begin{array}{llcc} \text { Stock price } &\$57 \\ \text { Strike price} &\$60\\ \text { Time to maturity } &56 \text {days}\\ \text { Standard deviation } &79\%\\ \text { Risk-free rate } &5.1\%\\\end{array}$

When the time period is in days, such as 56 days, the input for the time period is " = 56/365"
-What is the price of the call option?

• A) $9.32
• B) $8.12
• C) $8.73
• D) $9.80
• E) $5.97

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Definitions:

Rate Of Return

A measure of the profitability of an investment, calculated as a percentage of the original investment.

Net Value

The difference between the total benefits and total costs associated with an economic activity or transaction.

Long Run Deficit

A fiscal situation where a government consistently spends more than it earns over an extended period, leading to sustained budget deficits.