1. The current price of a non-dividend paying asset is $65, the riskless interest rate is 5% p.a. continuously compounded, and the option maturity is five years. What is the lower boundary for the value of a European vanilla put option on this asset with strike price of $80?
2. Based on the Rakon Limited Company’s financial performance analysis, to identify possible capital investment alternatives. Give two investment options. Describe and assess each alternative’s benefits and costs. Choose the preferred alternative and explain the basis for choosing it.