2, the stock price (S) is $50, the strike price (X) is $55, the risk-free interest rate (r) is 5%, and the time to expiration (T) is 1 year.
First, we need to calculate d1 and d2:
d1 = (ln(S/X) + (r + (σ^2)/2) * T) / (σ * sqrt(T))
d2 = d1 - σ * sqrt(T)
Where:
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