Ima Greedy, the CFO of Financial Saving Techniques has been granted options on 200,000 shares. The equity is currently trading at £22 a share and the options are at the money.The volatility of the
Equity has been about .20 on an annual basis over the last several years.The option mature in 3
Years and the risk free rate is 4%.
What is e-rt ?
A).6087
B).7087
C).7952
D).8476
E).8869

Question

Quizplus · Accepted Answer

To calculate $e^{-rt}$, where $r$ is the risk-free rate (4% or 0.04) and $t$ is the time to maturity (3 years), use the formula $e^{-rt}$. Plugging in the values, we get $e^{-0.04*3} = e^{-0.12}$. Calculating this gives approximately 0.8869.

Ima Greedy, the CFO of Financial Saving Techniques Has Been