Which of the Following Is NOT an Assumption of the Black

question 10

Multiple Choice

Which of the following is NOT an assumption of the Black and Scholes Option Pricing Model?

• A)Markets are frictionless and have no taxes or transaction cost
• B)The stock pays dividends during its option period
• C)Stock prices have a distribution that is skewed to the right
• D)The option may be exercised before maturity

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Definitions:

Cost of Goods Sold

An accounting term for the direct expenses related to producing the goods sold by a company, including materials and labor.