FIN MCQ
FIN402 Chapter 9
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.)
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.)
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
Answer: E
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