The Black and Scholes Option Pricing Model Makes an Assumption

question 1

True/False

The Black and Scholes option pricing model makes an assumption that stock prices are normally distributed with a constant mean returns over the period of the option.

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Definitions:

Total-Cost Curve

A graph that depicts the total cost of producing different quantities of a good or service, considering both fixed and variable costs.

Increasing Rate

Describes a situation where a quantity or metric, such as inflation, interest rates, or population, is growing over time.

Variable Cost

A cost that changes in proportion to the level of output or activity.

Fixed Cost

Fixed charges that stay the same no matter the production or sales volume, like rental costs, salary payments, and insurance rates.