Question: Let S = $69, s = 35%, r = 4.5%, and d = 2.5% (continuously compounded). Compute the Black-Scholes rho (r) of a $65-strike European

Let S = $69, s = 35%, r = 4.5%, and d = 2.5% (continuously compounded). Compute the Black-Scholes rho (r) of a $65-strike European call option with 6 months until expiration. (That is, compute the approximate change in the call price given a 1 percentage point increase in the risk-free interest rate.)

ANSWER:

0.1788

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