In a Binomial Tree Created to Value an Option on a Stock,what

question 5

Multiple Choice

In a binomial tree created to value an option on a stock,what is the expected return on the option?

• A) Zero
• B) The return required by the market
• C) The risk-free rate
• D) It is impossible to know without more information

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Definitions:

Conservation Tillage

An agricultural practice that minimizes soil erosion and water loss by leaving crop residue on fields between seasons.

Contour Farming

An agricultural technique in which farming (tilling, planting, etc.) is conducted following the contours of the land, aimed at reducing soil erosion and water runoff.

Undernourished

A condition where an individual does not receive adequate nutrients for proper health and growth.

Daily Calories

The total amount of energy, measured in calories, that a person consumes through food and drink in one day.