Ima Greedy, the CFO of Financial Saving Techniques has been granted options on 200,000 shares. The stock is currently trading at $22 a share and the options are at the money. The volatility of the stock has been about.20 on an annual basis over the last several years. The option mature in 3 years and the risk free rate is 4%. What is d₁? A) .1842 B) .4102 C) .4583 D) 0.5196 E) .5412

Question

Quizplus · Accepted Answer

The value of d1 is calculated using the Black-Scholes formula: d1 = (ln(S/K) + (r + (σ^2)/2) * T) / (σ * sqrt(T)). Given S = K = $22, r = 0.04, σ = 0.20, and T = 3, the calculation results in d1 = 0.5196.

Ima Greedy, the CFO of Financial Saving Techniques Has Been