Answer:
$8.66
Explanation:
From the question, given are
stock price = $80
strike price = $75
interest rate = 10% per annum = 0.10?
time duration = 6month = 6month/12 = 0.5
The lower bound is denoted by the equation
X - (Se-i × t)
Where
(X) is the strike price
(S) the spot price
i is the interest rate and
t is the time duration of the call option
Therefore
The lower bound = 80 - (75e^ -0.1x0.5)
= $8.66
