Assume That the Current Price of DEY Stock Is $25

question 19

Multiple Choice

Assume that the current price of DEY stock is $25, that a six-month 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:

High Quality

In the context of products or services, high quality refers to the degree to which they meet or exceed customers' expectations and standards.

Reliable

The quality of being trustworthy or of performing consistently well, often used to describe financial information that can be depended upon for accuracy.

Transitory Earnings

Earnings that are considered temporary or not expected to persist in the future, affecting long-term profitability assessment.

Future Free Cash Flows

Estimates of the amount of cash that a company will generate in the future after paying for operating expenses and capital expenditures.