What Should the Continuous Dividend Yield Be Replaced by When

question 4

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 on 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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