Question: The Binomial Model will generate a value for a European option on a nondividend paying stock that is very close to that generated by the

The Binomial Model will generate a value for a European option on a nondividend paying stock that is very close to that generated by the Black Scholes Merton Model when:

the option is neither deep in-the-money or deep out-of-the-money

the option has a time to expiration of less than one year

the volatility of the stock price exceeds the risk free rate

the time to expiration is divided into a very large number of small intervals

the annual volatility of the stock price is less that 30%

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