If We Use the Black-Scholes Model for Bond Options,then We

question 7

Multiple Choice

If we use the Black-Scholes model for bond options,then we assume that bond prices are lognormal,as the underlying asset in the Black-Scholes model is assumed to have a lognormal distribution.Which of the following is not a consequence of this assumption?

• A)Bond prices are non-negative.
• B)Interest rates are non-negative.
• C)Bond prices are positively skewed.
• D)Interest rates are not skewed.

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Definitions:

Late Adulthood

Late adulthood is a life stage that describes individuals typically aged 65 years and older, characterized by both physiological and cognitive changes, and the consideration of issues such as retirement and coping with physical decline and loss.

Decline

A gradual decrease in quality, quantity, or strength, sometimes referring to physical health, population, or economic conditions.

Death

The cessation of all biological functions that sustain a living organism, marked by the end of life.

Ego Differentiation

The process of finding alternative sources of self-worth as one ages, especially when previous roles such as work become less central.