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Hull: Fundamentals of Futures and Options Markets, Ninth Edition
Chapter 18: Binomial Trees in Practice
Multiple Choice Test Bank
1. How many nodes are there at the end of a Cox-Ross-Rubinstein five-step binomial tree?
A. 4
B. 5
C. 6
D. 7
2. Which of the following cannot be estimated from a single binomial tree?
A. delta
B. gamma
C. theta
D. vega
3. Which of the following is true for u in a Cox-Ross-Rubinstein binomial tree?
A. It depends on the interest rate and the volatility
B. It depends on the volatility but not the interest rate
C. It depends on the interest rate but not the volatility
D. It depends on neither the interest rate nor the volatility
4. How many different paths are there through a Cox-Ross-Rubinstein tree with four-steps?
A. 5
B. 9
C. 12
D. 16
