The Values of U and D Are Which of the Following

question 42

Multiple Choice

The values of u and d are which of the following?

• A)the return on the stock if it goes up and down,respectively
• B)the inverse of the ratio of the up and down probabilities,respectively,and the risk-free rate
• C)the normal probabilities of up and down movements,respectively
• D)one plus the return on the stock if it goes up and down,respectively
• E)none of the above

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Definitions:

Perfectly Inelastic Supply Curve

A perfectly vertical supply curve; quantity supplied remains constant no matter what happens to price.

Elastic

A characteristic of a good or service with a demand or supply that significantly changes in response to price changes.

Buyer

An individual or entity that purchases goods or services for personal use, resale, or to incorporate into the production of other goods.

Tax

An essential monetary charge or dissimilar levy exacted upon a taxpayer by a government sector to facilitate government expenses and diverse expenditures for the public.