The binomial model values options using an iterative approach by making the simplifying assumption that a stock's price has only two possible values at the end of the next period. Which of the following is true under this assumption?

A. Option payoffs can be replicated by creating a portfolio out of a risk-free bond and the underlying stock.

B. The value of an option increases in the "up" state and decreases in the "down" state.

C. Replication works under a one-step binomial assumption only.

D. If the payoffs are equal, then the value of the portfolio must equal the value of the option.

E. Both (A) and (D).