An American put option on a non-dividend-paying stock has an exercise price of $44 and 4 months to expiration. The price of the underlying stock is $35.76 and the risk-free rate is 3.9% p.a. What is the critical value of the time value of the option (in dollars and cents) below which it is optimal to exercise the option early?

Answer rating: 100% (QA)

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