If the Binomial Model Is Extended to Multiple Periods for a Fixed

question 47

Multiple Choice

If the binomial model is extended to multiple periods for a fixed option life,which of the following adjustments must be made?

• A)the up and down factors must be increased
• B)the risk-free rate must be increased
• C)the up and down factors and the risk-free rate must be decreased
• D)the initial stock price must be proportionately reduced
• E)none of the above

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