Question: 3. When moving from valuing an option on a non-dividend paying stock to an option on a currency which of the following is true? A)

 3. When moving from valuing an option on a non-dividend paying

3. When moving from valuing an option on a non-dividend paying stock to an option on a currency which of the following is true? A) The risk-free rate is replaced by the excess of the domestic risk-free rate over the foreign risk-free rate in all calculations B) The formula for u changes C) The risk-free rate be replaced by the excess of the domestic risk-free rate over the foreign risk-free rate for discounting D) The risk-free rate be replaced by the excess of the domestic risk-free rate over the foreign risk-free rate when p is calculated

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