A Call Option Is Currently Priced at $5

question 64

Multiple Choice

A call option is currently priced at $5.81. The price of the underlying stock is $53, the strike price is $55, the dividend yield of the stock is 2 percent, the risk-free rate is 6 percent, and the option has 74 days to maturity. What is the implied standard deviation of the stock?

• A) 68.14%
• B) 72.68%
• C) 65.27%
• D) 57.26%
• E) 61.08%

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Definitions:

Alpha Waves

These are brain waves detected by electroencephalography (EEG), typically indicating a state of wakeful relaxation.

Oval Window

A membrane-covered opening at the base of the stapes bone in the middle ear that transfers sound vibrations to the cochlea.

Basilar Membrane

A membrane in the cochlea of the inner ear that vibrates in response to sound and whose vibrations lead to activity in the auditory pathways of the brain.

Middle Ear

The part of the ear between the eardrum and the oval window that contains three small bones which transmit sound vibrations.