Question

Consistent with the revised FASB standard on stock options, the value of stock options is determined using which method?

1) Black-Scholes-Merton model
2) Binomial model
3) Monte Carlo simulation
4) All of the above

Answer 1

The value of stock options is determined using the Black-Scholes-Merton model.

Step-by-step explanation:

The value of stock options is determined using the Black-Scholes-Merton model consistent with the revised FASB standard. This model is widely used in the financial industry to calculate the theoretical price of options. It takes into account factors such as the stock price, strike price, time until expiration, interest rates, and volatility.

The Binomial model and Monte Carlo simulation are also used in option pricing, but they are not specifically mentioned in the revised FASB standard on stock options. These models allow for more complex scenarios and can be useful in certain situations where the assumptions of the Black-Scholes-Merton model may not hold.

Therefore, the correct answer is 1) Black-Scholes-Merton model.