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Calculate the value of a short put if the exercise price is $61.0, the premium is $96.8 and the spot price is $177.2.Question 3Answera.-19.40b.-116.20c.213.00d.96.80e.157.80

Question

Calculate the value of a short put if the exercise price is 61.0,thepremiumis61.0, the premium is 96.8 and the spot price is $177.2.Question 3Answera.-19.40b.-116.20c.213.00d.96.80e.157.80

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Solution

The value of a short put option can be calculated using the formula:

Value of Short Put = Premium - Max(0, Exercise Price - Spot Price)

Given in the question: Exercise Price = 61.0Premium=61.0 Premium = 96.8 Spot Price = $177.2

Substituting these values into the formula:

Value of Short Put = 96.8Max(0,96.8 - Max(0, 61.0 - $177.2)

Since the Spot Price is greater than the Exercise Price, the value inside the Max function will be negative. Therefore, Max(0, 61.061.0 - 177.2) will be 0.

So, the Value of Short Put = 96.80=96.8 - 0 = 96.8

Therefore, the correct answer is d.96.80.

This problem has been solved

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