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The price of an asset will either rise by 25% or fall by 40% in...

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Accounting

The price of an asset will either rise by 25% or fall by 40% in 1 year, with equal probability. A European put option on this asset matures after 1 year. Assume the following:

Price of the asset today: 100

Strike price of the put option: 130

Put option premium: 7

What is the expected profit for this asset?

please give me a detailed and elaborated answer for 10 marks I have the short answer. Also mention what do we do with the put option premium.

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