Consider the toss of a (loaded) coin. In a "good" outcome, punter (bettor) will receive £1 in 12 months. In a "bad" outcome she will not receive anything. The fair market price of this bet is £0.45 and current prevailing risk-free interest rate is 5%. What is the implied probability of a "good" outcome? Assume continuous compounding. A) 0.4223 B) 0.4731 0.5269 0.5594

Consider the toss of a (loaded) coin. In a "good" outcome, punter (bettor) will receive £1 in 12 months. In a "bad" outcome she will not receive anything. The fair market price of this bet is £0.45 and current prevailing risk-free interest rate is 5%. What is the implied probability of a "good" outcome? Assume continuous compounding. A) 0.4223 B) 0.4731 0.5269 0.5594

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 35QA

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