The current stock price of Alcoco is $70, and the stock does not pay dividends. The instantaneous risk-free rate of return is 6%. The instantaneous standard deviation of Alcoco's stock is 40%. You want to purchase a put option on this stock with an exercise price of $75 and an expiration date 30 days from now. According to the Black-Scholes OPM, you should hold ________ shares of stock per 100 put options to hedge your risk.
A) 30
B) 34
C) 69
D) 74

Question

Quizplus · Accepted Answer

d₁ = 11eaaae8_8b43_ea85_a4b8_0f6ce4044521_TB6474_11 = 0.50129 △ = N (d₁) = 0.308084 - 1 = -0.6919 Therefore, 0.6919 × 100 = 69.19 shares must be held per 100 put options.

The Current Stock Price of Alcoco Is $70, and the Stock