Question $4$: General Questions $(25$ points$).$

Circle the right answer for each question below:

$1.$ Which Hedge Fund strategy is riskier in general?

a$.$ Non$-$Directional

b$.$ Directional

$2.$ Even when the Survivorship bias, backfill bias, and liquidity limitations of hedge funds are considered, the superior performance of hedge funds continues.

a$.$ True

b$.$ False

$3.$ Binomial tree option pricing models cannot be used to price Asian options.

a$.$ True

b$.$ False

$4.$ If the stock price is lognormally distributed, then the stock return measured as the log difference cannot be normally distributed.

a$.$ True

b$.$ False

$5.$ The original Black$-$Scholes model did not consider stocks that paid dividends. Merton's follow$-$up model assumed that stocks paid dividends continually.

a$.$ True

b$.$ False