Only one interest rate is input, implying a flat yield curve

The underlying assumption behind the concept of stock options is that one does not have the ability to create a situation where one can make money regardless of whether the underlying asset moves up or down. Having the ability to purchase a combination of options such that one would make money regardless of the movement of the stock price is called arbitrage. Most financial analysts believe stock options should be priced on the no-arbitrage principle. The easiest way to arbitrage is to borrow money against an interest rate. One could either earn interest with a Treasury bond, or one could spend it on purchasing an option. The Black-Scholes Model is based only on the interest rates of Treasury bonds, and we will treat options as such.