A binary option pays off $165 if a stock price is greater than $65 in three months. The current stock price is $50 and its volatility is 40%. The risk-free rate is 4% and the expected return on the stock is 10%. Note that some of the subsequent values were assumed and not calculated.

Question 26 of 30

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The risk-neutral probability of the payoffs (d2) is .

Enter the amount, either negative (e.g., -5.6789) or positive (e.g., 5.6789), rounded to four decimals.

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Question 27 of 30

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Assume that d2 was calculated as 1.4250 (minus 1.4250), use the tables to determine N(-d2), use interpolation. The probability is therefore = .

Enter the four-decimal cumulative probability (e.g., 0.5832).

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Question 28 of 30

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What will the value of the option be if N(-d2) were determined to be 0.1072?

The value of the option is $ .

Round your answer to two decimal places (e.g., 12.23)