Explain the investment of baht

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In August 1998, the Bank of Thailand was reported to have offered new foreign investors in troubled T'hai banks the opportunity to resell their shares back to the central bank at the end of 5 years for their original purchase price. Suppose that the expected standard deviation of the Thai bank stocks was 45% a year, the risk free interest rate on Thai baht was 15% per year and the bank stocks were not expected to pay any dividends. Assume a foreign investor made an investment of Baht 100 million. How much is this option worth?

Reference no: EM133062177

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