A Stock Has a Market Price of $25 and a Standard

question 14

Multiple Choice

A stock has a market price of $25 and a standard deviation of returns of 24 percent.The $25 call option matures in 4 months and the risk-free rate is 2.89 percent.N(d₁) is .555198 and N(d₂) is .500096.What is the value of the call option per share of stock?

• A)$1.71
• B)$1.86
• C)$1.50
• D)$1.62
• E)$2.16

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Definitions:

Resamples

The process of drawing repeated samples from observed data, often for purposes of statistical inference or estimation.

Distinct

Clearly different or separate from others.

Measurements

The act, process, or system of ascertaining the size, quantity, or degree of something.

Probability

The measure of the likelihood that an event will occur.