In the Black-Scholes Model, If an Option Is Not Likely

question 9

Multiple Choice

In the Black-Scholes model, if an option is not likely to be exercised, both N(d₁) and N(d₂) will be close to ________. If the option is definitely likely to be exercised, N(d₁) and N(d₂) will be close to ________.

• A) 1; 0
• B) 0; 1
• C) −1; 1
• D) 1; −1

---

Definitions:

Closing Entries

At the close of an accounting period, recordings are made to move balances from temporary accounts to those that are permanent.

Adjustment Columns

Special columns found in accounting ledgers and worksheets used for making necessary modifications to accounts at the end of a reporting period.

Depreciation Expense

The cost allocated over the useful life of a tangible asset to account for its decline in value due to use and time.

Accumulated Depreciation

The total depreciation for a fixed asset that has been charged to expense since the asset was acquired and available for use.