In Situations Where an Option-Pricing Model Is Required to Be

question 23

Multiple Choice

In situations where an option-pricing model is required to be used to determine the fair value of equity instruments granted, the accounting standard, AASB 2 Share-based Payment:

• A) requires the use of a binominal option-pricing model.
• B) requires the use of the Black-Scholes-Merton formula.
• C) allows the entity to choose the option-pricing model it wishes to use, but contains a number of factors that the option-pricing model selected must take into account as a minimum.
• D) requires expected dividends to be taken into account when measuring the shares or options granted.

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Definitions:

Cultural Diffusion

The dissemination of social practices and cultural values from one community to another.

Inventions

Innovations or creations that are novel and beneficial, often changing existing methods, ideas, or devices.

Authority Ranking

A social structure where individuals are ranked according to their power, status, or authority, with clear hierarchies and levels of command.

Market Pricing

The process of determining the selling price of a product or service based on supply, demand, and other market factors.