If the Volatility of a Non-Dividend-Paying Stock Is 20% Per

question 18

Multiple Choice

If the volatility of a non-dividend-paying stock is 20% per annum and a risk-free rate is 5% per annum,which of the following is closest to the Cox,Ross,Rubinstein parameter p for a tree with a three-month time step?

• A) 0.50
• B) 0.54
• C) 0.58
• D) 0.62

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Definitions:

Payments to Suppliers

Amounts of money paid by a company to its suppliers for goods or services received.

Payments to Employees

Refers to all forms of compensation, both monetary and in-kind, given to employees for their services.

Payments of Interest

The act of paying the interest charge on a loan or debt, typically made at regular intervals over the lifetime of the loan.

Payments for Income Tax

Financial outlays made by individuals or corporations to government entities in accordance with taxable income or profits.