If the Binomial Model Is Extended to Multiple Periods for a Fixed

Multiple Choice

If the binomial model is extended to multiple periods for a fixed option life,which of the following adjustments must be made?

A) the up and down factors must be increased
B) the risk-free rate must be increased
C) the up and down factors and the risk-free rate must be decreased
D) the initial stock price must be proportionately reduced
E) none of the above