The Black-Scholes Formula Is Notable Because It Does NOT Require

question 43

Multiple Choice

The Black-Scholes formula is notable because it does NOT require us to know:

• A)the expected return on a stock.
• B)the risk-free rate.
• C)the volatility of the stock.
• D)the dividend rate on the stock.
• E)the stock price.

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Definitions:

Net Worth

The total assets minus total outside liabilities of an individual or a company.

Interest Rate

The cost of borrowing money or the return on savings, expressed as a percentage of the principal.

Annual Interest Rate

The percentage of the principal that is paid as a fee over a period of one year for borrowing or saving money.

Capital Income

This term refers to the total amount of money generated from investments, dividends, interest, and any other sources other than labor earnings.