Yvonne Lang, VP of Finance at Digital Components, Inc

question 38

Multiple Choice

Yvonne Lang, VP of Finance at Digital Components, Inc.(DCI) , wants a regression model which predicts the average collection period on credit sales.Her data set includes two qualitative variables: sales discount rates (0%, 2%, 4%, and 6%) , and total assets of credit customers (small, medium, and large) .The number of dummy variables needed for "sales discount rate" in Yvonne's regression model is ___.

• A)1
• B)2
• C)3
• D)4
• E)7

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Definitions:

Black-Scholes Model

A mathematical model used for pricing options, providing estimates of the variations over time of financial instruments.

European Put Options

A type of put option that can only be exercised at the expiration date, allowing the holder to sell the underlying asset at a specified strike price.

American Put Options

Financial instruments that give the holder the right to sell a specified amount of an underlying asset at a set price before the option expires.

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase an asset or security at a predetermined price within a specific time frame.