Q-43. Solution: D

While the drift rate (%) is assumed constant, per the risk-neutral valuation, we let drift rate equal the riskless rate. The real-world rate of return is not required, is not an input in the Black-Scholes, and as Hull explains, is not an increasing function of the option (as a higher implied discount rate offsets the higher expected growth rate).

In regard to (A), (B) and (C), EACH is TRUE as a key assumption underlying the Black-Scholes OPM.