Show that Black-Scholes call option hedge ratios also increase as the stock price increases. Consider a 1-year option with exercise price $50, on a stock with annual standard deviation 20%. The T-bill rate is 3% per year. Find N(d1) for stock prices (a) $45, (b) $50, and (c) $55.

Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
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Chapter7: Corporate Valuation And Stock Valuation
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Show that Black-Scholes call option hedge ratios also increase as the stock price increases. Consider a 1-year option with exercise price $50, on a stock with annual standard deviation 20%. The T-bill rate is 3% per year. Find N(d1) for stock prices (a) $45, (b) $50, and (c) $55.

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