Quiz Ch 21 – T/F Cumulative Probabilities’ Range
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
True or false: The values of N(d1) and N(d2), denoting cumulative probabilities, lie within the interval of 0 to 1.
True or false: The values of N(d1) and N(d2), denoting cumulative probabilities, lie within the interval of 0 to 1.
True or false: Option holders do NOT have the right to receive any dividends paid on the underlying stock.
True or false: In the case of a European option, the put value is the difference between the call value and the sum of the share price and the present value of the exercise price.
True or false: To assess an American put option, it is advisable to employ a multiperiod binomial model, as the Black-Scholes formula does not accommodate early exercise.
True or false: To maximize value for an in-the-money American call option on a nondividend paying stock with ample time until expiration, it is more advantageous for the investor to trade the option with another party rather than exercising it prematurely.
True or false: The binomial option pricing model operates within discrete time intervals.
True or false: The Black-Scholes model operates on a noncontinuous time basis.
True or false: An investor might employ a knock-in barrier option to decrease the cost of purchasing a call option.
True or false: Put option delta equals the delta of a corresponding call option minus one.
True or false: The delta value for a put option is consistently positive.