Which of the Following Statements About the Binomial Interest Rate

Multiple Choice

Which of the following statements about the binomial interest rate derivative pricing model is INCORRECT?

A) The binomial interest rate derivative pricing model assumes that the markets are competitive.
B) The binomial interest rate derivative pricing model assumes that there is no credit risk.
C) The binomial interest rate derivative pricing model requires as many bonds trading in each period as the number of periods in the entire tree.
D) In its most general form,the branches in a binomial interest rate tree do not recombine.
E) The binomial interest rate derivative pricing model imposes a structure on the evolution of zero-coupon bond prices.