Which One of the Five Factors Included in the Black-Scholes

question 23

Multiple Choice

Which one of the five factors included in the Black-Scholes option pricing model cannot be directly observed?

• A) Risk-free rate
• B) Strike price
• C) Standard deviation
• D) Stock price
• E) Life of the option

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Definitions:

Direct Method

A cash flow statement preparation method that lists specific operating cash receipts and payments, directly showing sources and uses of cash.

Indirect Method

A cash flow statement approach that adjusts net income for changes in non-cash accounts to calculate cash from operating activities.

Operating Activities

Activities directly related to the operation of the business, including cash flows from operations, investing, and financial activities.

Direct Method

A cash flow statement preparation approach that shows the specific cash inflows and outflows associated with the operating activities.