The Black-Scholes Formula Assumes That I) the Risk-Free Interest Rate

question 79

Multiple Choice

The Black-Scholes formula assumes that I) the risk-free interest rate is constant over the life of the option.
II) the stock price volatility is constant over the life of the option.
III) the expected rate of return on the stock is constant over the life of the option.
IV) there will be no sudden extreme jumps in stock prices.

• A) I and II
• B) I and III
• C) II and II
• D) I, II, and IV
• E) I, II, III, and IV

---

Definitions:

Tax Revenue

The income that is gained by governments through taxation, which is used to fund public services and government obligations.

Organized Crime

Crime committed by structured groups typically involving the provision of illegal goods and services.

Internet Gambling

Placing bets or wagers on games of chance or skill, typically using the internet or other forms of digital communication.

Billion Dollars

A monetary unit equal to one thousand million dollars, often used to indicate a vast amount of wealth or cost.