Which of the Following Statements About Caplet-Floorlet Parity Is INCORRECT

question 19

Multiple Choice

Which of the following statements about caplet-floorlet parity is INCORRECT?

• A) It is a relationship in the interest rate world that is analogous to put-call parity for European options in the world of equities that pay no dividends.
• B) It enables you to price a floorlet using the price of a caplet along with some other relevant information.
• C) It enables you to price a caplet using the price of a floorlet along with some other relevant information.
• D) It is a relationship that links the prices of a caplet,a floorlet,and a zero-coupon bond with a forward rate.
• E) It is a relationship that links the prices of four securities: a caplet,a floorlet,a stock,and a bond.

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Definitions:

Desired Response

The preferred or intended outcome or reaction to a specific stimulus or set of circumstances.

Intermittent Reinforcement

A conditioning schedule where rewards or punishments are given out irregularly, which can strengthen behavior.

Learned Helplessness

A condition in which a person suffers from a sense of powerlessness, arising from a traumatic event or persistent failure to succeed.

Generalization

The process of applying the findings or conclusions from specific instances to broader contexts or populations.