Which of the Following Is Not an Assumption Underlying the Black-Scholes

question 17

Multiple Choice

Which of the following is not an assumption underlying the Black-Scholes model?

• A) The rate of interest is constant.
• B) The dividend rate must be less than the interest rate.
• C) Stock volatility is constant.
• D) There are no taxes and transactions costs.

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Definitions:

Prime Costs

The combination of direct materials and direct labor costs.

Direct Labor

The cost of wages for employees who are directly involved in the production of goods or services.

Direct Materials

The raw materials that are directly used in the manufacturing of a product, easily traceable to the finished product.

Equivalent Units Of Production

The number of production units that could have been completed within a given accounting period, given the resources consumed.