Consider a 1year option with exercise price 80 on a stock wi

Consider a 1-year option with exercise price $80 on a stock with annual standard deviation 15%. The T-bill rate is 3% per year. Find N(d₁) for stock prices $75, $80, and $85. (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Solution

K = Strike price = 80, Time (t) = 1, risk free rate (r) = 3% ,
N(d₁) = [ln(S/K) + ( r + s²/2)* t] / (s*t^1/2)

for stock price 75
N(d₁) = [ln(75/80) + ( 3% + 15%²/2)* 1] / (15%*1^1/2) = -0.1553
for stock price 80
N(d₁) = [ln(80/80) + ( 3% + 15%²/2)* 1] / (15%*1^1/2) = 0.2750
for stock price 85
N(d₁) = [ln(85/80) + ( 3% + 15%²/2)* 1] / (15%*1^1/2) = 0.6792

Best of Luck. God Bless