# Black-Scholes call option.

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.

© BrainMass Inc. brainmass.com October 9, 2019, 9:47 pm ad1c9bdddfhttps://brainmass.com/economics/principles-of-mathematical-economics/black-scholes-call-option-197486

#### Solution Preview

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) = ...

#### Solution Summary

This solution is comprised of a detailed explanation to find N(d1) for stock prices $45, $50, and $55.

$2.19