Find the Lower Bound of a European Foreign Currency Put

question 8

Multiple Choice

Find the lower bound of a European foreign currency put if the spot rate is $3.50,the domestic interest rate is 8 percent,the foreign interest rate is 7 percent,the option expires in six months,and the exercise price is $3.75.

• A)zero
• B)$0.250
• C)$0.366
• D)$0.108
• E)none of the above

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Definitions:

Late Majority

A segment of technology adoption lifecycle that represents consumers who are skeptical and adopt new products or technologies after the average member of society.

Early Majority

A segment of consumers who adopt a new product or innovation shortly after the early adopters, representing a significant portion of the adoption curve.

Late Adopters

Consumers who purchase and adopt new technologies or products after the majority of the market has already done so, often due to skepticism or lack of interest.

Innovators

Individuals or entities that introduce new ideas, practices, or products, often pioneers in their field or market.