The Current Price of a Stock Is $100

question 9

Multiple Choice

The current price of a stock is $100. Consider the Black-Scholes model price of a six-month call option at strike $101, given an interest rate of 2% and a dividend rate of 1%? The volatility is 25%. What is the real-world (physical) probability of the option ending up in the money if the growth rate of the stock is expected to be 5% per year?

• A) 0.45
• B) 0.48
• C) 0.49
• D) 0.50

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