The Important Assumptions of the Black-Scholes Formula Are

question 44

Multiple Choice

The important assumptions of the Black-Scholes formula are:
I. the price of the underlying asset follows a lognormal random walk. II) investors can adjust their hedge continuously and at no cost.
III. the risk-free rate is known.
IV. the underlying asset does not pay dividends.

• A) I only
• B) I and II only
• C) I, II, III and IV
• D) III and IV only

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