Which of the following is not an assumption underlying the Black-Scholes option-pricing model?
A) The risk-free rate is known and constant over the life of the option.
B) The probability distribution of stock prices is lognormal.
C) The world is risk-neutral.
D) The variability of a stock's return is constant.
E) There are no transaction costs involved in trading options.
Correct Answer:
Verified
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