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 d2.
A)-0.02766
B)+0.02766
C)+0.20270
D)-0.20270

Question

Quizplus · Accepted Answer

To calculate d2, we use the Black-Scholes formula: d2 = [ln(S/K) + (r - 0.5σ^2)T] / (σ√T). Here, S = 44.375, K = 45, r = 0.07, σ = 0.31, and T = 156/365. Plugging these values into the formula gives d2 ≈ -0.02766.

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