Show that Black-Scholes call option hedge ratios also increase as the stock price increases. Consider a 1-year

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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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Investments

ISBN: 9781259277177

11th Edition

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

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