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AFP CTP Question # 77 Topic 8 Discussion

CTP Exam Topic 8 Question 77 Discussion:
Question #: 77
Topic #: 8

What is the premium (price) for an oil contract, if the following conditions are present?

LIBOR rate of 5%

Out of the money cost of $3

Strike price is $4

In the money price of $1

Speculative premium of $2


A.

$3


B.

$5.25


C.

$7


D.

$7.35


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