View the step-by-step solution to:

You own a $250,000 house and pay $1,000 for fire insurance. What is the exercise value of the fire insurance put option if the house does not burn

You own a $250,000 house and pay $1,000 for fire insurance. What is the exercise value of the fire insurance put option if the house does not burn (and you have paid no claim)? What is the realized return on your investment in fire insurance?

Sign up to view the entire interaction

Top Answer

Dear Student Please find... View the full answer

Finance - 8233003.doc

If no claim has been paid in that case exercise value of put option is $250000.
Since no claim has been piad, in that case no gain will be realized. Person only get unrealized
gain.

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online