What is the value of a call option on one share of stock

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Reference no: EM131900625

1. Peter has been granted options on 50,000 shares. The stock is currently trading at $17 a share and the options are at the money. The volatility of the stock returns averages 16 percent. The options mature in 2 years and the risk-free rate is 3.45 percent. N(d1) is .662055 and N(d2) is .576052. Given this information, what is the value of a call option on one share of this stock?

$2.11

$1.70

$2.21

$1.89

$2.28

2. Under risk neutrality, the expected return on an asset will equal:

the market risk premium.

the risk-free rate of interest.

the market rate of return.

zero.

the asset beta times the market risk premium.

Reference no: EM131900625

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