Assume That the Current Price of DEY Stock Is $25

question 21

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:

Palpitation

A sensation in which a person is aware of an irregular, hard, or rapid heartbeat.

Cardiac Enzyme

Biomarkers measured to evaluate heart function, particularly in the diagnosis of a heart attack or myocardial infarction.

Myocardial Infarction

A medical condition characterized by the death of heart muscle due to the lack of blood supply, commonly known as a heart attack.

Cholesterol

A waxy, fat-like substance found in all cells of the body, necessary for making hormones, vitamin D, and substances that help digest foods.