Assume That the Current Price of DEY Stock Is $25,that

question 5

Multiple Choice

Assume that the current price of DEY stock is $25,that a 1 year call option on the stock has a strike or exercise price of $27.50,the risk free rate is 4%,and that you have calculated N(d₁) as .5476 and N(d2) as .4432.Use the Black-Scholes model to calculate the price of the option.

• A)$1.74
• B)$4.20
• C)$1.98
• D)$2.50

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Definitions:

Mark-up Realized

The percentage increase between the cost of a product and its selling price, indicating the profit margin.

Sonic Boom

A loud sound associated with the shock waves created when an object travels through the air faster than the speed of sound.

Operating Profit

The profit achieved from a company's core business operations, excluding deductions of taxes and interest.

Regular Price

The standard or usual cost of an item or service without any discounts, promotions, or special offers applied.