Draw the tree for a put option on $20,000 with a strike price of £10,000. the current exchange rate is £1.00 = $2.00 and in one period the dollar value of the pound will either double or be cut in half. the current interest rates are i$ = 3% and are i£ = 2%. multiple choice none of the options both of the options

$ 0.000912 / pound

Explanation:

Current spot rate : 100 pound / $ or 0.01 $ / pound

In the next period the $ value of the pound can either increase or decrease by 15%

$ Risk-free rate = 5% and

pound Risk-free rate = 1%

Net Risk- free Rate = 5 - 1

                               = 4%

Risk-Neutral Probability of price Rise (p) = (0.04 - 0.085) / (1.15 - 0.85)

                                                                   = 0.653

$ price of pound if price rises = 1.15 x 0.01 =$ 0.0115 / pound

$ price of pound if price falls = 0.85 x 0.01 = $ 0.0085 / pound

Strike price = current spot rate (as option is at the money) = 0.01 $ / pound

Therefore, pay offs one period later

if price is $ 0.0115 / pound, pay off (p₁)= 0.0115 - 0.01

                                                              = 0.0015$/ Pound

If price is 0.0085 $ / pound, pay off (p₂) = $0

Hence, Expecyed pay off = p₁ x p + p₂ x (1-p)

                                           = 0.0015 x 0.633 + 0 x ( 1 - 0.633)

                                            = $ 0.00095 / pound

Call price = Present value of Expected pay off at Net Risk-free risk

                = 0.00095 exp (0.04)

                 = $ 0.000912 / pound

the first successful, urban blues recording, selling more than 75,000 copies, was made in year 1920.

mamie smith recorded the first commercially successful example of the urban blues,   with the recording of “crazy blues”."crazy blues" was recorded on august 10, 1920, in new york city. within a month of the release of “crazy blues” it had sold 75,000 copies.