Find the Lower Bound of a European Foreign Currency Put

question 40

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.(The interest rates are continuously compounded. )

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

---

Definitions:

Reducing Tillage

Agricultural practice of minimizing soil disturbance, aimed at preserving soil health and reducing erosion.

Managing Irrigation

The process of applying controlled amounts of water to plants at needed intervals, focusing on conserving water and ensuring its efficient use in agriculture.

Soil Covered

The top layer of the earth's surface composed of mineral particles, organic matter, water, and air, which supports plant life.

Desertification

The process by which fertile land becomes desert, typically as a result of drought, deforestation, or inappropriate agriculture.