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-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 variance of the stock has been about .07 on an annual basis over the last several years. The options mature in 3 years and the risk free rate is 4%.
What is d₂?

Question

Quizplus · Accepted Answer

d1 = [ln(22/22) + (0.04+0.07/2)*3]/(0.3*sqrt(3)) = 0 d2 = 0 - 0.3*sqrt(3) = -0.5196 N(-d2) = N(0.5196) = 0.3015 Therefore, d = e^(-0.04*3)*0.3015 = 0.0326.

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