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:

Cytokinesis

The process during cell division in which the cytoplasm divides, resulting in two daughter cells.

Telophase

Stage of mitosis during which chromosomes arrive at opposite spindle poles, decondense, and become enclosed by a new nuclear envelope.

Eukaryotic Cell Cycle

The series of events that take place in a eukaryotic cell, leading to its division and duplication of its DNA, to generate two daughter cells.

Neoplasms

Neoplasms are abnormal growths of tissue that arise from uncontrolled, progressive multiplication of cells and can be benign or malignant (cancer).