e. In 1973, Fischer Black and Myron Scholes developed the Black-Scholes Option Pricing Model (OPM) e. (1.) What assumptions underlie the OPM? In deriving this option pricing model, Black and Scholes made the following assumptions: 1. The stock underlying the call option provides no dividends or other distributions during the life of the option 2. There are no transaction costs for buying or selling either the stock or the option. 3. The short-term, risk-free interest rate is known and is constant during the life of the option. 4. Any purchaser of a security may borrow any fraction of the purchase price at the short-term risk-free interest rate. 5. Short selling is permitted, and the short seller will receive immediately the full cash proceeds of today's price for a security sold short. 6. The call option can be exercised only on its expiration date. 7. Trading in all securities takes place continuously, and the stock price moves randomly. e. In 1973, Fischer Black and Myron Scholes developed the Black-Scholes Option Pricing Model (OPM) e. (1.) What assumptions underlie the OPM? In deriving this option pricing model, Black and Scholes made the following assumptions: 1. The stock underlying the call option provides no dividends or other distributions during the life of the option 2. There are no transaction costs for buying or selling either the stock or the option. 3. The short-term, risk-free interest rate is known and is constant during the life of the option. 4. Any purchaser of a security may borrow any fraction of the purchase price at the short-term risk-free interest rate. 5. Short selling is permitted, and the short seller will receive immediately the full cash proceeds of today's price for a security sold short. 6. The call option can be exercised only on its expiration date. 7. Trading in all securities takes place continuously, and the stock price moves randomly