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Answer to Question #1424 in Finance for ken
Question #1424
1. An investor notices that one Australian dollar is selling for $0.67 in USD. A put option on an
Australian dollar with an exercise price of $0.75 is selling for $0.14. An investor takes a long
position of one Australian dollar and buys a protective put. The profit of the protective put is _____
if the price of one Australian dollar at expiration is $0.70?
2. Suppose the current stock price is $50 and the option exercise prices for both call and put are $47.
The risk-free rate is 5% per annum. Both options mature in one year. The lower bound for a
European put option is _____ and the lower bound for an American call option is _____.
Australian dollar with an exercise price of $0.75 is selling for $0.14. An investor takes a long
position of one Australian dollar and buys a protective put. The profit of the protective put is _____
if the price of one Australian dollar at expiration is $0.70?
2. Suppose the current stock price is $50 and the option exercise prices for both call and put are $47.
The risk-free rate is 5% per annum. Both options mature in one year. The lower bound for a
European put option is _____ and the lower bound for an American call option is _____.
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