A call option is currently priced at $5.81. The price of the underlying stock is $53, the strike price is $55, the dividend yield of the stock is 2 percent, the risk-free rate is 6 percent, and the option has 74 days to maturity. What is the implied standard deviation of the stock?
A) 68.14%
B) 72.68%
C) 65.27%
D) 57.26%
E) 61.08%

Question

Quizplus · Accepted Answer

The implied standard deviation (volatility) is calculated using an option pricing model like Black-Scholes. Given the option price, stock price, strike price, dividend yield, risk-free rate, and time to maturity, the implied volatility that matches the option price of $5.81 is approximately 68.14%.

A Call Option Is Currently Priced at $5