Use the Following Information to Answer the Following Question(s)

question 34

Multiple Choice

Use the following information to answer the following question(s) .
Valuing a call option using the Black-Scholes model:
Current price of ABZ stock = $50
Exercise or strike price of the call option = $48
The maturity of the option is 0.5 years
The annualized variance in the returns on the stock is .20
The risk free rate of interest is 3% per annum
-What is the value of d₂ that should be used when calculating the value of a call option on this stock with the Black-Scholes option pricing model.

• A).33464
• B).07483
• C).40822
• D).01842

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Definitions:

Debt Ratio

A financial ratio that measures the extent of a company’s leverage by comparing total liabilities to total assets.

Borrowed Funds

Money obtained through loans or credit arrangements, which is expected to be repaid with interest.

Total Assets

The sum of all current and non-current assets owned by a company, indicating the company's overall value.

Average Collection Periods

The average number of days it takes for a business to receive payments owed by its customers.