The domestic and foreign risk-free interest rates

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A currency is currently worth $1.80 and has a volatility of 15%. The domestic and foreign risk-free interest rates are 5% and 2%, respectively. Use a two-step binomial tree to value a) a European four-month put option with a strike price of $1.79, and b) the portfolio which will hedge a short position in the European put option today.

Reference no: EM13937249

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