my question is why is 12% used as the discount factor?
secondly, as per the answer they show the present value of underlying asset (Pa)= $30,613,600 (approximately), could you kindly tell me as to how did they arrive to this answer
If you follow the link from the main P4 page to “P4 Revision and past questions”, you will find my lectures working through the whole of this question (which should answer your question!) 🙂