Which of the Following Is NOT True in a Risk-Neutral

question 16

Multiple Choice

Which of the following is NOT true in a risk-neutral world?

• A) The expected return on a call option is independent of its strike price
• B) Investors expect higher returns to compensate for higher risk
• C) The expected return on a stock is the risk-free rate
• D) The discount rate used for the expected payoff on an option is the risk-free rate

---

Definitions:

Persistent

Demonstrating tenacity and determination in continuing a course of action despite difficulty or delay in achieving success.

Setting Priorities

The process of arranging tasks or objectives in order of importance to efficiently manage time and resources.

Trivial Activities

Nonessential activities that are completely discretionary and do not directly support a person’s goals.

Ongoing Activities

Necessary “maintenance” tasks that should be managed carefully, so that they don’t take up too much time.