The price of an asset will either rise by 25% or fall by 40% in...
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Accounting
The price of an asset will either rise by 25% or fall by 40% in 1 year, with equal probability. A European put option on this asset matures after 1 year. Assume the following:
Price of the asset today: 100
Strike price of the put option: 130
Put option premium: 7
What is the expected profit for this asset?
please give me a detailed and elaborated answer for 10 marks I have the short answer. Also mention what do we do with the put option premium.
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