Hull:Options,Futures,andotherDerivatives,NinthEditionChapter21:BasicNumericalProceduresMultipleChoiceTestBank:Questions1.HowmanynodesarethereattheendofaCox-Ross-Rubinsteinfive-stepbinomialtree?A.4B.5C.6D.72.Whichofthefollowingcannotbeestimatedfromasinglebinomialtree?A.deltaB.gammaC.thetaD.vega3.WhichofthefollowingistrueforuinaCox-Ross-Rubinsteinbinomialtree?A.ItdependsontheinterestrateandthevolatilityB.ItdependsonthevolatilitybutnottheinterestrateC.ItdependsontheinterestratebutnotthevolatilityD.Itdependsonneithertheinterestratenorthevolatility4.HowmanydifferentpathsaretherethroughaCox-Ross-Rubinsteintreewithfour-steps?A.5B.9C.12D.165.Whenwemovefromassumingnodividendstoassumingaconstantdividendyield,whichofthefollowingistrueforaCox,Ross,Rubinsteintree?A.TheparametersuandpchangeB.pchangesbutudoesnotC.uchangesbutpdoesnotD.Neitherpnoruchanges6.Whenthestockpriceis20andthepresentvalueofdividendsis2,whichofthefollowingistherecommendedwayofconstructingatree?A.Drawatreeforaninitialstockpriceof20andsubtractthepresentvalueoffuturedividendsateachnodeB.Drawatreeforaninitialstockpriceof22andsubtractthepresentvalueoffuturedividendsateachnodeC.Drawatreewithaninitialstockpriceof18andaddthepresentvalueoffuturedividendsateachnodeD.Drawatreewithaninitialstockpriceof18andadd2ateachnode7.WhatistherecommendedwayofmakinginterestratesafunctionoftimeinaCox,Ross,Rubinsteintree?A.MakeuafunctionoftimeB.MakepafunctionoftimeC.MakeuandpafunctionoftimeD.Makethelengthsofthetimestepsunequal8.WhatistherecommendedwayofmakingvolatilityafunctionoftimeinaCox,Ross,Rubinsteintree?A.MakeuafunctionoftimeB.MakepafunctionoftimeC.MakeuandpafunctionoftimeD.Makethelengthsofthetimestepsunequal9.AbinomialtreepricesanAmericanoptionat$3.12andthecorrespondingEuropeanoptionat$3.04.TheBlack-ScholespriceoftheEuropeanoptionis$2.98.WhatisthecontrolvariatepriceoftheAmericanoption?A.$3.06B.$3.18C.$2.90D.$3.0810.ThechapterdiscussesanalternativetotheCox,Ross,Rubinsteintree.Inthisalternative,whichofthefollowingaretrue:A.There...
