Identify a Problem Associated with Using the Black-Scholes Model to Value

Multiple Choice

Identify a problem associated with using the Black-Scholes model to value bond options.

A) It assumes short-term interest rates are constant.
B) It assumes that commissions are charged.
C) It assumes fluctuating variance of returns on the underlying asset.
D) It assumes that the variance of bond prices is constant over time.
E) All of these.