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Question 1 1 pts Consider the binomial model with risk-free rate r and period length h for a stock with dividend rate 8. Of the
Question 1 1 pts Consider the binomial model with risk-free rate r and period length h for a stock with dividend rate 8. Of the following choices, what does the term el-bh best represent? It's a factor to force the expected return of an investment in stock to match the risk-free rate. The expected return over one period of buying one share of stock. The expected return over one period of an investment of 1 in the risk-free asset.. The expected return of any derivative security over one period. None of the other responses. It's just a term that shows up in the formula for risk-neutral probabilities and has no other meaning. Question 2 1 pts When using the binomial model, you can't make decisions about investment using only the risk-neutral measure because all investments have the same expected rate of return in the risk-neutral measure. all investors are risk-neutral in the risk-neutral measure. all information about risk was removed from the model by switching from physical to risk-neutral measure. there are undue assumptions made in the construction of the risk-neutral measure. None of the other responses
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