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Chartered Financial Analyst Level 2

Chartered Financial Analyst Level 2

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22 A French manufacturer receives fixed USD amounts for products exported to the United States. The company is concerned that the USD will depreciate versus the EUR over the next year and considers buying a put option on the USD. The risk-free rate is 4.9% in the United States and 3.3% in Europe, and the current exchange rate is 1.09 USD/EUR (1.09 USD per 1 EUR). The appropriate carry rate and underlying price to use in the Black–Scholes–Merton model to value the USD put option are closest to:

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