Which one of the following statements is correct concerning the Black-Scholes option pricing model?
A)The model assumes a stock pays a constant annual dividend.
B)The model expresses time in terms of years.
C)The model is based on American-style options.
D)The model assumes that the current stock price is equal to the strike price.
E)The model assumes the put is in the money.

Question

Quizplus · Accepted Answer

The Black-Scholes option pricing model expresses time in terms of years. A is incorrect because the model assumes a stock pays no dividends. C is incorrect because the model is based on European-style options. D is incorrect because the model assumes the current stock price can be different from the strike price. E is incorrect because the model can be used for both in-the-money and out-of-the-money options.

Which One of the Following Statements Is Correct Concerning the Black-Scholes