Given the following information, what is the value of d2 as it is used in the Black-Scholes Option Pricing Model?
A) .021608
B) .125161
C) .175608
D) .200161
E) .250161

Question

Given the following information, what is the value of d2 as it is used in the Black-Scholes Option Pricing Model? 
A) .021608 
B) .125161 
C) .175608 
D) .200161 
E) .250161

Quizplus · Accepted Answer

The value of d2 in the Black-Scholes Option Pricing Model can be calculated using the formula: 
d2 = d1 - σ√T 
where d1 = [ln(S0/K) + (r + σ^2/2)T]/(σ√T) 
In the given image, we can see that S0 = 50, K = 55, r = 0.06, σ = 0.3, T = 0.5. 
Using these values, we can calculate d1 as: 
d1 = [ln(50/55) + (0.06 + 0.3^2/2)×0.5]/(0.3√0.5) = -0.6784 
Substituting this value in the formula for d2, we get: 
d2 = -0.6784 - 0.3√0.5 = -0.8039 
Therefore, the value of d2 as used in the Black-Scholes Option Pricing Model is -0.8039, which corresponds to option price B.

Given the Following Information, What Is the Value of D2