Which One of the Following Statements Is Correct Concerning the Black-Scholes

question 8

Multiple Choice

Which one of the following statements is correct concerning the Black-Scholes option pricing model?

• A)The model assumes a stock pays a constant annual dividend.
• B)The model expresses time in terms of years.
• C)The model is based on American-style options.
• D)The model assumes that the current stock price is equal to the strike price.
• E)The model assumes the put is in the money.

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Definitions:

Economies of Scale

The cost advantage achieved when increasing the scale of production leads to a reduction in the average cost of each unit produced.

Diseconomies of Scale

The phenomenon where companies experience an increase in average costs per unit when production is scaled up beyond a certain point.

Specialized Activities

Tasks or operations that require specific expertise or skills, often focused on a particular aspect of a business or industry.

Economies of Scale

The cost advantage that arises with increased output of a product, resulting from efficiencies in production processes.