A deposit instrument offered by a bank guarantees that investors will receive a return during a 6-month period that is the greater of (a) zero and...

A deposit instrument offered by a bank guarantees that investors will receive a returnduring a 6-month period that is the greater of (a) zero and (b) 40% of the returnprovided by a market index. An investor is planning to put $100,000 in theinstrument. Describe the payoff as an option on the index. Assuming that the risk-freerate of interest is 8% per annum, the dividend yield on the index is 3% per annum,and the volatility of the index is 25% per annum, is the product a good deal for theinvestor?