In Situations Where an Option-Pricing Model Is Required to Be

question 14

Multiple Choice

In situations where an option-pricing model is required to be used to determine the fair value of equity instruments granted AASB 2 Share-based Payment:

• A) requires expected dividends to be taken into account when measuring the shares or options granted.
• B) allows the entity to choose the option-pricing model it wishes to use, but contains a number of factors that the option-pricing model selected must take into account as a minimum.
• C) requires the use of a binominal option-pricing model.
• D) requires the use of the Black-Scholes-Merton formula.

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Definitions:

Enforcement

The act of compelling compliance with a law, rule, agreement, or order through the application of penalties for violations.

Conforming Goods

Products that meet the specifications and requirements set forth in a contract of sale.

Obligated

Being legally or morally bound to do something.

Perfect Tender Rule

A legal principle requiring sellers to deliver goods that exactly meet the terms and specifications of the contract.