Which of the Following Statements Is False

question 36

Multiple Choice

Which of the following statements is false?

• A) An alternative to using the Black-Scholes formula is to compute the value of growth options using risk-neutral probabilities.
• B) Future growth options are not only important to firm value, but can also be important in the value of an individual project.
• C) While the Black-Scholes formula values American options, most growth options cannot be exercised at any time.
• D) Out-of-the-money calls are riskier than in-the-money calls, and because most growth options are likely to be out-of-the-money, the growth component of firm value is likely to be riskier than the ongoing assets of the firm.

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Definitions:

Organic Molecules

Chemical compounds that contain carbon and are found in all living organisms, essential for life.

Organic Polymers

Large molecules composed of repeated subunits (monomers) that are typically carbon-based, like proteins, nucleic acids, and plastics.

Silt

Fine particles of rock and soil that are smaller than sand and larger than clay, often found on riverbeds and fertile agricultural lands.

Sand

Fine particles of rock and mineral matter, typically found on beaches, deserts, and riverbeds.