1. One assumption of the Black-Scholes model is that theunderlying stock does not pay a dividend.

a. true

b. false

2. The B/S model cannot be used to find the value of Americanput options.

a. true

b. false

3. The variable with the largest affect on the B/S model is therisk-free rate.

a. true

b. false

4. In equilibrium, the call option premium calculated using theB/S model should always equal the option premium calculated usingthe binomial model.

a. true

b. false