The Binomial Option Pricing Model Approximates the Price of an Option

question 8

True/False

The binomial option pricing model approximates the price of an option obtained using the Black-Scholes option pricing model as the number of subintervals increases.

---

Definitions:

Carrying Amount

The net amount at which an asset or liability is reported on the balance sheet, calculated as the original cost minus any accumulated depreciation, amortization, or impairment costs.

FICA - Medicare

Part of the Federal Insurance Contributions Act taxes, specifically aimed at funding Medicare, a healthcare program for the elderly and certain disabled individuals in the United States.

Withheld

Refers to a portion of an individual's earnings or payments that is not provided to them but is instead held back, often for tax purposes.

Matched by Employer

Pertains to contributions or payments, typically toward FICA taxes or retirement funds, that an employer duplicates for an employee.