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Why Does the Black-Scholes Call Formula Use the Present Value

Question 14

Multiple Choice

Why does the Black-Scholes call formula use the present value of the exercise price and not merely the exercise price in the formula?


A) All finance must use the time value of money.
B) Call options are rarely exercised early.
C) The present value accounts for a potential dividend.
D) The put option uses the future value.

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