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Compute the probability that the S&P 500 index value is greater than 2,400 in 1 year...

Compute the probability that the S&P 500 index value is greater than 2,400 in 1 year according to the Black Scholes model. Assume that the current level of the index is 2,200, the risk-free rate is 2% per annum, the dividend yield on the index is 1% per annum, and the volatility of the index is 20%.

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Answer #1

ANSWER IN THE IMAGE((YELLOW HIGHLIGHTED). FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

there is 31.5% probability that call will be exercised i.e S&P will be above 2400.

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