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

---

Definitions:

Genetic Mutation

A permanent alteration in the DNA sequence that makes up a gene, which can result in a variation in physical appearance, disease, or other traits.

Malaria

Malaria is a life-threatening disease transmitted through the bite of an infected Anopheles mosquito, characterized by fever, chills, and flu-like symptoms.

Evolutionary Theory

A scientific explanation for the diversity of life on Earth, focusing on how species change over generations through mechanisms such as natural selection.

Dating

A stage of romantic relationships where two people engage in social activities to assess mutual compatibility as partners in a more committed intimate relationship.