An exchange rate is currently AUD 1 = USD 0.66. It is expected to move up...
An exchange rate is currently AUD 1 = USD 0.66. It is expected to move up to
AUD 1 = USD 0.72 or down to AUD 1 = USD 0.62 in the next nine months. The risk-free interest rates (continuously compounded) are:
|
AUD or Australian Dollars |
5.0% p.a. |
|
USD or United States Dollars |
10.20% p.a. |
Required
What is the value of a nine-month American put option with a strike price of AUD 1 = USD 0.68 (i.e., the put option holder has the right to sell 1 AUD in exchange for 0.68 USD)? Use a one-period binomial model.
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An exchange rate is currently AUD 1 = USD 0.66. It is expected
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