Identify a Problem Associated with Using the Black-Scholes Model to Value

question 48

Multiple Choice

Identify a problem associated with using the Black-Scholes model to value bond options.

• A)It assumes short-term interest rates are constant.
• B)It assumes that commissions are charged.
• C)It assumes fluctuating variance of returns on the underlying asset.
• D)It assumes that the variance of bond prices is constant over time.
• E)All of these.

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