When the Time Period Is in Days, Such as 56

question 42

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 delta of the call option?

• A) 0.506
• B) 0.511
• C) 0.652
• D) 0.762
• E) 0.916

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Definitions:

Externalities

Economic side effects or consequences that affect uninvolved third parties; can be positive or negative.

External Costs

Costs generated by a production or consumption activity that are not borne by the producer or consumer but by society at large.

Transaction Costs

Costs associated with the process of buying and selling, including search and information costs, bargaining costs, and enforcement costs.

Coase Theorem

A theory that suggests that if property rights are well-defined and transaction costs are low, externalities will be efficiently resolved through bargaining between parties.