In a binomial tree created to value an option on a stock, what is the expected return on the option?
A. Zero
B. The return required by the market
C. The risk-free rate
D. It is impossible to know without more information
C
The expected return on the option on the tree is the risk-free rate. This is an application of risk-neutral valuation. The expected return on all assets in a risk-neutral world is the risk-free rate.
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If the annual rate of interest in a market is 12%, the monthly rate of discount will equal
A. 1%. B. 12%. C. 24%. D. 144%.
Traditionally, price was never a major determinant of buyer choice
Indicate whether the statement is true or false
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Which of the following is NOT a weakness of stratified sampling?
A) difficult to select relevant stratification variables B) not feasible to stratify on many variables C) expensive D) A and C only E) A, B, and C are weaknesses of stratified sampling.