QUESTION 3 You purchase a 2 year call option. The option gives you the right to...

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QUESTION 3 You purchase a 2 year call option. The option gives you the right to buy the stock at $65. The current stock price is $70, the risk free rate is 6%, and standard deviation is 30%. N(dl) = 0.7485 N(d2) = 0.5969 If you would like to replicate buying this call, how much money would you need to borrow and how many shares of stock would you need to buy? A. Borrow $37.9 and buy 0.60 shares B. Borrow $34.4 and buy 0.60 shares C. Borrow $37.9 and buy 0.75 shares D. Borrow $41.7 and buy 0.81 shares E. Borrow $34.4 and buy 0.75 shares QUESTION 3 You purchase a 2 year call option. The option gives you the right to buy the stock at $65. The current stock price is $70, the risk free rate is 6%, and standard deviation is 30%. N(dl) = 0.7485 N(d2) = 0.5969 If you would like to replicate buying this call, how much money would you need to borrow and how many shares of stock would you need to buy? A. Borrow $37.9 and buy 0.60 shares B. Borrow $34.4 and buy 0.60 shares C. Borrow $37.9 and buy 0.75 shares D. Borrow $41.7 and buy 0.81 shares E. Borrow $34.4 and buy 0.75 shares

Answer rating: 100% (QA)

The replicating portfolio is embedded in the BlackScholes model To replicate this call you w... View the full answer