Which of the Following Variables Are Part of the Black-Scholes

question 107

Multiple Choice

Which of the following variables are part of the Black-Scholes option pricing model?
I. the market price of the underlying stock
II. the volatility of the underlying security
III. the strike price of the option
IV. the risk-free rate of interest
V. the beta of the underlying security
VI. the time remaining before the option expires

• A) I, II, IV and VI only
• B) I, II and III only
• C) I, II, III, IV and VI only
• D) I, II, III, IV, V and VI

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Definitions:

Payout

Refers to the distribution of financial rewards or dividends to shareholders or the disbursement of funds to satisfy debts or expenses.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenue.

Cumulative

Refers to the aggregate amount that has been gathered or accumulated over time.

Par Value

A nominal or face value assigned to a share of stock or a bond by the issuing company, often unrelated to its market value.