What Is the Value of D2 That Should Be Used

question 8

Multiple Choice

What is the value of d2 that should be used when calculating the value of a call option on this stock with the Black- Scholes option pricing model?

• A) .33464
• B) .07483
• C) .40822
• D) .01842

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Definitions:

Treasury Stock

Shares that were issued and later reacquired by the company, reducing the amount of outstanding stock.

Par Common Stock

The nominal value assigned to share of common stock, as specified in the corporate charter, which represents the minimum price shares can be issued.

Cost Method

An accounting method used to value investments, where the investment is recorded at its acquisition cost without recognizing any changes in market value.

Stock Dividend

A company's distribution of extra shares to its shareholders, as an alternative to cash payouts.