Find the Value of a One-Year Put Option on $15,000

question 36

Multiple Choice

Find the value of a one-year put option on $15,000 with a strike price of €10,000. In one year the exchange rate (currently S₀($/€) = $1.50/€) can increase by 60% or decrease by 37.5% . The current one-year interest rate in the U.S. is i_$ = 4% and the current one-year interest rate in the euro zone is i_€ = 4%.

• A)€1,525.52
• B)$3,328.40
• C)$4,992.60
• D)€2,218.94
• E)None of the above

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Definitions:

Merchandising Business

A merchandising business buys goods in their finished form for the purpose of resale without further processing, making profit through buying and selling activities.

Statement Of Stockholders' Equity

A financial document that shows the changes in the value of a company's equity over a reporting period, including shares issued, dividends, and earnings.

Income Statement

A financial statement that shows a company's revenues, expenses, and profits or losses over a specific period, providing insights into its operational efficiency.

Retail Business

A business type that sells goods or services directly to end consumers.