Which of the Following Is NOT Needed to Price Options

question 73

Multiple Choice

Which of the following is NOT needed to price options using the binomial approach?

• A) the current price of the underlying stock
• B) the risk-free rate
• C) the possible values that the underlying stock could take in the future
• D) the strike price of the option
• E) the value of N(d₁)

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Definitions:

Opportunity Cost

The expense associated with not choosing the second-best option when a decision is made.

Soybeans

A type of legume native to East Asia, widely grown for its edible beans which are used in various food products and for oil.

Opportunity Cost

Opportunity cost is the cost of foregoing the next best alternative when making a decision, representing the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Truck

A motor vehicle designed to transport cargo or goods.