Use VaR Techniques to Determine the Cost of Insurance on a Risky

Multiple Choice

Use VaR techniques to determine the cost of insurance on a risky investment.The investment asset has a value of $150 and pays no dividend.The historical standard deviation of the asset is 20% and the expected return on the asset is 15%.At the 95% confidence level,what is the price of a put option that insures the asset over the next 6 months?

A) $0.33
B) $1.25
C) $2.65
D) $6.56