What Should the Continuous Dividend Yield Be Replaced by When

question 6

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:

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