The current stock price of Alcoa is $70 and the stock does not pay dividends. The instantaneous risk free rate of return is 6%p.a continuously compounded. The instantaneous standard deviation of Alcoa’s stock is 40 %.
a. You wish to purchase a call option on this stock with an exercise price of $75 and an expiration date 30 days from now. Based on the Black-Scholes option pricing formula, what is the value of d1 for the option?