Problem:
The premium for a put option to sell ten million Swiss francs for dollars at $0.66/Sfr is quoted at 2%. The current spot rate is $0.64/Sfr. If the dollar interest rate is 8% and the option is used to hedge a three-month franc exposure,
Required:
Question: What is the per franc cost of the option in terms of the transaction date?
A) $0.0131.
B) $0.0128.
C) $0.0204.
D) $0.0140.
Note: Show all workings.