Use the following information to answer the following question(s) .
Valuing a call option using the Black-Scholes model:
Current price of ABZ stock = $50
Exercise or strike price of the call option = $48
The maturity of the option is 0.5 years
The annualized variance in the returns on the stock is .20
The risk free rate of interest is 3% per annum
-What is the value of d₁that should be used when calculating the value of a call option on this stock with the Black-Scholes option pricing model.

Question

Quizplus · Accepted Answer

d1 = (ln(S/X) + (r + (sigma^2)/2) * t) / (sigma * sqrt(t))= (ln(50/48) + (0.03 + (0.20^2)/2) * 0.5) / (0.20 * sqrt(0.5))= (0.0416 + 0.0325) / 0.1414= 0.33464

Use the Following Information to Answer the Following Question(s)