Consider the binomial model with risk-free rate r and period length h for a stock with dividend rate . Of the following choices, what does the term best represent; and, when using the binomial model, you can't make decisions about investment using only the risk-neutral measure because:

(Give an answer to both parts of the question)

A) It's a factor to force the expected return of an investment in stock to match the risk-free rate.

B) The expected return over one period of buying one share of stock.

C) The expected return over one period of an investment of 1 in the risk-free asset..

D) The expected return of any derivative security over one period.

E) None of the other responses concerning

F) It's just a term that shows up in the formula for risk-neutral probabilities and has no other meaning.

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you can't make decisions about investment using only the risk-neutral measure because:

G) all investments have the same expected rate of return in the risk-neutral measure.

H) all investors are risk-neutral in the risk-neutral measure.

I) all information about risk was removed from the model by switching from physical to risk-neutral measure.

J) there are undue assumptions made in the construction of the risk-neutral measure.

K) None of the other responses concerning the risk-neutral measure

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