Suppose immediately after signing the agreement (and delivering the money) in the previous question, the continuously compounded interest rate jumps…
Suppose immediately after signing the agreement (and delivering the money) in the previous question, the continuously compounded interest rate jumps to 10%, and the stock price falls to $28. You wish to terminate your agreement. What is closest to a fair payment from your counterparty to you to terminate the agreement? (A negative number would reflect a payment from you to the counterparty.)
a. -$2
b. -$1
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d. $1
e. $2