Cola Company options have an exercise price of $45 and expire in 156 days. The current price of Cola Company stock is $44.375. The (annually compounded)risk-free rate is 7 percent per year and the standard deviation of Cola Company's stock returns is 0.31. Calculate d1.
A)0.0226
B)0.1750
C)−0.3157
D)0.3157

Question

Quizplus · Accepted Answer

d1 = {[ln($44.375/$45)] + [(0.07 + 0.5*(0.31^2))*(156/365)]}/[0.31*(156/365)^0.5] = 0.1750.

Cola Company Options Have an Exercise Price of $45 and Expire