YOUR BANK is thinking to issue an European Put Option of strike price $940.00 and one-year maturity on a two-year zero coupon bond. What should be the issue price / offer price / premium on that Put Option?

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ANSWER: Strike Price of Put $937 Issue Price must always be highec than Strike Price such that Put option is slightly Out-ofmoney. Hence, Issue Price =$950 Premium of the Put Option will be calculated as penklack Scholes option. Since Delta will be slightly less than 0.50, option price will be calculated acoerdingly. ANSWER: Strike Price of Put $937 Issue Price must always be highec than Strike Price such that Put option is slightly Out-ofmoney. Hence, Issue Price =$950 Premium of the Put Option will be calculated as penklack Scholes option. Since Delta will be slightly less than 0.50, option price will be calculated acoerdingly