Let S - $53, -27%,r-5.5%, and 8-2% (continuously compounded). Compute the Black-Scholes delta (A) of a...

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Answer 1

Answer #1

c. 0.4923

Delta is given by N(d1)

d1 In() + (r + 02/2)T σNT

Dividend adjusted stock price = S*e(-dividend yield*time) = 53*e^(-0.02*0.5) =$52.473

d1 = (ln(52.473/55) + (0.055+0.27*0.27/2)*(0.5))/(0.27*(0.5)^0.5)

d1 = -0.00685

N(d1) = 0.4923

Answer 2

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