- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 11. Binomial Valuation of Options

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**CFA Practice Question**

The binomial model values options using the ______.

A. risk-free rate

B. required yield of the underlying

C. risk-free rate + risk premium

**Explanation:**The option is valued as though investors are risk-neutral.

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