1. A company has granted 2,000,000 options to its employees. The stock price and strike price are both $70. The options last 8 years and vest after 2 years. The company decides to value the options using an expected life of 6 years and a volatility of 30% per annum. Dividends on the stock are $1.50 per year, payable halfway through each year, and the risk-free is 5%. What will the company report as an expense for the options on its income statement? A. 44,648,028.58 B.44,082,648.58 C. 44,028,648.58 D. 44,028,468.84

2. Consider an American put option on a stock. The stock price is $65.75, the time to maturity is 9 months, the risk-free rate is 5% per annum, the exercise price is $60. If the value of the put option is $1.50, what is the implied volatility of the underlying stock? A. 17.86% B. 16.78% C.18.76% D.18.67%

3. A stock price is currently $40. Assume that the expected return from the stock is 19% and its volatility is 25%. What is the probability distribution for the rate of return (with continuous compounding) earned over a two-year period? A. 15.578% B. 15.857% C.15.875% D.15.785%