Given the following information, what is the value of d2 as it is used in the Black-Scholes Option Pricing Model?
Share price €42
Time to expiration .25
Risk-free rate .055
Standard deviation .50
D1 )375161

Question

Quizplus · Accepted Answer

First, we need to calculate d1 and d2 using the formulas:
d1 = [ln(S/K) + (r + (σ^2/2))t] / (σ√t)
d2 = d1 - σ√t

Plugging in the values, we get:
d1 = [ln(42/42) + (0.055 + (0.50^2/2))0.25] / (0.50√0.25) = 0.375161
d2 = 0.375161 - 0.50√0.25 =  0.125161
Therefore, the value of d2 is 0.125161, which corresponds to answer choice B.

Given the Following Information, What Is the Value of D2