Consider a 1-year option with exercise price $65 on a stock with annual standard

Question

Consider a 1-year option with exercise price $65 on a stock with annual standard deviation 15%. The T-bill rate is 3% per year. Find N(d1) for stock prices $60, $65, and $70. (Do not round intermediate calculations. Round your answers to 4 decimal places.)

check my workreferencesebook & resources

Consider a 1-year option with exercise price $65 on a stock with annual standard deviation 15%. The T-bill rate is 3% per year. Find N(d1) for stock prices $60, $65, and $70. (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Explanation / Answer

d1=(ln(S/X)+((r+(Var/2))*(T-t))/(SD)*(T-t)^(1/2)

= (ln(60/65)+((0.03+0.0225/2))*1)/(0.15)*(1)^(1/2)=- 0.25862

S=60;N(d1)=N(-0.25)-0.86*[N(-0.25)-N(-0.28)]=0.4013-0.86*(0.4013-0.3897)=

S=65

d1=

Nd1= N(0.27)+0.5*[N(0.28)-N(0.27)] =0.6064+0.5*(0.6103-0.6064) =

S=70

d1=

0.769053

=0.7691

Nd1=0.7764+.91*(.7794-.7764)

=

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.