A Stock Is Currently Trading At $S _ { 0 } = 26.15$

question 23

Multiple Choice

A stock is currently trading at $S _ { 0 } = 26.15$ . It is not expected to pay dividends over the next year. You price a one-month call option on the stock with a strike of $K = 25$ using the Black-Scholes model and find the following numbers: $$\begin{array} { r l r l } d _ { 1 } & = 0.717 & d _ { 2 } & = 0.645 \\N \left( d _ { 1 } \right) & = 0.763 & N \left( d _ { 2 } \right) & = 0.740\end{array}$$ Given this information, the risk-neutral probability of the call finishing in the money is

• A) 71.7%
• B) 64.5%
• C) 76.3%
• D) 74.0%

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Definitions:

Sociocultural Theory

A theory of development that emphasizes the role of social interaction and cultural context in shaping cognitive development.

Proximal Development

A concept in the theory of learning which suggests that learners progress most effectively when they are guided by tasks slightly beyond their current competence.

Vygotsky

A Russian psychologist known for his theories on cognitive development, emphasizing the crucial role of social interaction in learning.

Cognitive Development

The process by which a child's understanding of the world changes due to age and experience, including the development of thinking, problem-solving, and decision-making capabilities.