Why Does a Discounted Cash-Flow Approach to Options Valuation Not

question 23

Multiple Choice

Why does a discounted cash-flow approach to options valuation not work?

• A)It is impossible to estimate expected cash flows.
• B)One cannot find the appropriate interest rate for an infinitely small interval.
• C)Finding the opportunity cost of capital is impossible as the risk of options changes every time the stock price moves.
• D)The strike price of options changes.

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