What Should the Continuous Dividend Yield Be Replaced by When

question 12

Multiple Choice

What should the continuous dividend yield be replaced by when options on an exchange rate are valued using the formula for an option of a stock paying a continuous dividend yield?

• A)The domestic risk-free rate
• B)The foreign risk-free rate
• C)The foreign risk-free rate minus the domestic risk-free rate
• D)None of the above

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Definitions:

Choppy Impressions

Fragmented or discontinuous perceptions or understandings of a situation or experience.

Displace

In memory theory, to cause information to be lost from short-term memory by adding new information.

Short-Term Memory

A component of memory where small amounts of information can be temporarily kept for a relatively brief period.

New Information

Newly acquired data, knowledge, or insights that were not previously known to an individual or within a specific context.