Which of the Following Statements About the Binomial Model Is

question 16

Multiple Choice

Which of the following statements about the binomial model is incorrect?

• A)it converges to the Black-Scholes-Merton model
• B)it can accommodate early exercise
• C)it allows only two stock prices at expiration
• D)it can be extended to a large number of time periods
• E)none of the above

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Definitions:

Systolic/Diastolic Measurement

A measurement of blood pressure indicated by two numbers; the systolic (maximum) pressure over the diastolic (minimum) pressure.

<90/60

Indicates blood pressure readings lower than 90 millimeters of mercury systolic and 60 millimeters of mercury diastolic, which is considered hypotension.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price in a specified time period.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a given price in a specified period.