The value of e⁻ᴿᵗ is 0.8886 for the given the standard deviation of returns averages 28 percent with the options mature in 5 years and the risk-free rate is 2.36 percent.
So, the correct option is option ( C).
Exponential function is characterized by rapid increase (as in size or extent) and an exponential growth rate.
We have given that,
standard deviation of returns averages = 28%
options mature, t = 5 years and
Risk-free rate , R = 2.36 percent.
we have to calculate the value of e−Rt.
Exp(-Rt) = e⁻⁽²·³⁶⁾⁵
use exp(value) function to find the value :
=exp(-5 × 2.36%)
= exp(- 0.118 )
=0.8886
Hence, the the value of e⁻ᴿᵗ is 0.8886.
To learn more about Exponential function, refer:
https://brainly.com/question/9330192?
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Complete question:
I. M. Greedy has been granted options on 500,000 shares. The stock is currently trading at $48 a share and the options are at the money. The standard deviation of returns averages 28 percent. The options mature in 5 years and the risk-free rate is 2.36 percent. What is the value of e-rt?
a) .7087
b) .8476
c) .8886
d) .6087
e) .7952
