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n a binomial option pricing model, when moving from valuing an option on a non-dividend payine to an index option, which of the following is

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n a binomial option pricing model, when moving from valuing an option on a non-dividend payine to an index option, which of the following is true for estimating uptick probability P7 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 8. The formula for u changes C. The risk-free rate is replaced by the excess of the domestic risk-free rate over the dividend yield for discounting D. The risk-free rate be replaced by the excess of the foreign risk-free rate over the domestic risk-free rate when p is calculated. Q#9. The current price of a non-dividend-paying stock is S30. Over the next six months it is expected to rise to $36 or fall to $26. Assume the risk-free rate is zero. What is the downtick probability (1-P) that the stock price will be $26? 0.6 0.5 0.4 price for fixed (suaranteed)ol price swap for an oll roducing firm,the firm fixed price. is worse off with the swap if oil price rises above the is a a. ble to remove the oil price risk which in similar to hedging risk. ter off with the swap if oil price drops below the fixed price. b. d. all of the above (a, b, and c). Q#1 interest rates fall, which of the following is true? into an interest rate swap where it is paying fixed and receiving LIBOR When 1. A A. B. C. D. The value of the swap to the company increases. The value of the swap to the company decreases. The value of the swap can either increase or decrease. The value of the swap does not change providing the swap rate remains the same. Q#12. Which ofthe following is a use of a currency swap? A. To exchange an investment in one currency for an investment in another currency. B. To exchange borrowing in one currency for borrowings in another currency. C. To take advantage situations where the tax rates in two countries are different. D. All of the above

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