The following table shows premiums for one-year European put options: Strike Price $70 75 80 Put Premium $5.18 7.40 10.05 The risk-free annual rate of interest is 4% effective. The spot price at expiration is $72. X is the highest profit and Y is the lowest profit under the above three puts. Determine X - Y. (A) $.94 (B) $2.25 (C) $2.94 (D) $5.06 (E) $7.84

The following table shows premiums for one-year European put options: Strike Price $70 75 80 Put Premium $5.18 7.40 10.05 The risk-free annual rate of interest is 4% effective. The spot price at expiration is $72. X is the highest profit and Y is the lowest profit under the above three puts. Determine X - Y. (A) $.94 (B) $2.25 (C) $2.94 (D) $5.06 (E) $7.84

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 56QA

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