A Stock Is Currently Trading At $S _ { 0 } = 25.85$

question 21

Multiple Choice

A stock is currently trading at $S _ { 0 } = 25.85$ . It is not expected to pay dividends over the next year. You price a six-month put option on the stock with a strike of $K = 15$ using the Black-Scholes model and find the following numbers: $$\begin{array} { r l r l } d _ { 1 } & = 2.115 & d _ { 2 } & = 1.832 \\N \left( d _ { 1 } \right) & = 0.983 & N \left( d _ { 2 } \right) & = 0.967\end{array}$$ Given this information, the risk-neutral probability of the put finishing in the money is

• A) 1.7%
• B) 1.832%
• C) 2.115%
• D) 3.3%

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