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%.
-Calculate N(d₂) .

Question

Quizplus · Accepted Answer

The correct answer is A because N(d2) = 0.5130. This is calculated using the formula N(d2) = 1 - N(d1), where d1 is calculated using the formula d1 = (ln(S/X) + (r + σ^2/2) * t) / (σ * √t), where S is the current stock price, X is the strike price, r is the risk-free rate, σ is the volatility, and t is the time to maturity.

Ima Greedy, the CFO of Financial Saving Techniques Has Been