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The current market value of the assets of AMN Co. is $47 million, with a standard deviation of 21 percent per year. The firm has zero-coupon bonds outstanding with a total face value of $35 million. These bonds mature in two years. The risk-free rate is 3.6 percent per year, compounded continuously. What is the value of d1 as it applies to the Black-Scholes option pricing model

Respuesta :

Answer:

The answer is "1.38357"

Explanation:

Given values:

The current market value of the assets (s)= $ 47

standard deviation([tex]\sigma[/tex]) = 21%

risk-free rate (r)=3.6%

Exercise price (X) = 35

Maturity time (T)= 2 year

Formula:

[tex]\bold{d1 =\frac{\frac{s}{X}+(r+0.5 \times \sigma^2)\times T}{\sigma \times \sqrt{T}}}\\\\[/tex]

by solving the given values, we get the d1 value that is "1.38357"

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