Which of the Following Is Possible in a Modified Cox,Ross,Rubinstein

question 7

Multiple Choice

Which of the following is possible in a modified Cox,Ross,Rubinstein binomial tree?

• A) The interest rate and volatility can both be functions of time
• B) The interest rate or the volatility can be a function of time, but not both
• C) The interest rate can be a function of time but the volatility cannot
• D) The interest rate and volatility must be constant

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Definitions:

Inventory Period

The amount of time it takes for a company to sell through its current stock of inventory.

Accounts Receivable Period

The average number of days that it takes a company to collect payments after a sale has been made, a critical component of managing cash flow.

Accounts Payable Period

The average number of days it takes for a business to pay its suppliers and vendors.

Inventory Period

The average time it takes for a company to convert its inventory into sales or the duration of the inventory cycle.