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

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