Which of the Following Is Correct

question 52

Multiple Choice

Which of the following is correct ?

• A) Risk neutral refers to the state of ignoring the risk involved in determining expected rates of return.
• B) Risk neutral pricing uses the cost of capital to discount the future cash flows of the option.
• C) Risk-neutral pricing ignores the probability of state in pricing the option.
• D) b and c

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Definitions:

Confidence Level

The probability that a statistical result is not due to chance, often expressed as a percentage.

Accuracy Level

The degree to which the result of a measurement, calculation, or specification conforms to the correct value or standard.

Sample Size

The number of observations or individuals taken from a population for the purpose of statistical analysis.