1.Which of the following is NOT one of the assumptions of the Black-Scholes model?

	a.	Volatility of the stock is normally distributed
	b.	There are no transaction costs
	c.	Time is continuous
	d.	There are no jumps in the stock price

2.You short 200 contracts of a call option on Stock XYZ. The contract multiplier is 100, i.e. each contract is on 100 shares of the stock. At the time when you take the option position, option premium is 0.95 per share. You also decide to hedge your option position by purchasing some underlying stock with borrowed funds.

One day later, option price is $1.20. Interest rate and volatility are constant.

Which of the following statements is correct?

	a.	The underlying stock price went down since you took the option position
	b.	To hedge the initial position, you needed to buy 20,000 shares of the stock
	c.	The delta of the option went down since you took the option position
	d.	To adjust the hedge, you need to increase your debt account