All of the following factors affect the price of a stock option except
A)the risk-free rate.
B)the riskiness of the stock.
C)the time to expiration.
D)the expected rate of return on the stock.

Question

Quizplus · Accepted Answer

All of the other factors listed (risk-free rate, riskiness of the stock, time to expiration) are inputs into the Black-Scholes model for pricing stock options. The expected rate of return on the stock, however, is not an input in this model and therefore does not directly affect the price of the stock option.

All of the Following Factors Affect the Price of a Stock