Black-Scholes call option.
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Show that Black-Scholes call option hedge ratios also increase as the stock price increases. Consider a one-year option with exercise price $50 on a stock with annual standard deviation 20%. The T-bill rate is 8% per year. Find N(d1) for stock prices $45, $50, and $55.
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This solution is comprised of a detailed explanation to find N(d1) for stock prices $45, $50, and $55.
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S = $45, $50, and $55
X = $50
r = 8%
ó = 20%
T = 1
N(d1) = N(-0.0268) = 0.4893
N(d1) = N(0.50) = ...
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