Which of the Following Assumptions of the Black-Scholes-Merton Model Is

question 57

Multiple Choice

Which of the following assumptions of the Black-Scholes-Merton model is not correct?

• A)the stock volatility is constant
• B)the stock return follows a normal distribution
• C)there are no transaction costs
• D)there are no taxes
• E)none of the above

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Definitions:

Cash

Liquid assets held by a company or person, used for transactions or as a store of value.

Maturity Date

The date on which a financial obligation must be repaid or settled in full.

Principal Repaid

The amount of a loan's principal that has been paid back to the lender, not including interest payments.

Face Value

The nominal or dollar value printed on a security, such as a bond or stock, representing its worth at issuance.