Calc option payoff on a put reference, different, computing, understand

andytrader

Own at Put(X=35); Stock prices 33.5 at expiration; RFR = 4%

The put option is worth the greater of $0 or (exercise price – spot price at expiration). Since the exercise price is greater than the spot price at expiration, the put is worth (35 – 33.50) = $1.50.

I understand RFR is required for computing American from European style options, but given no reference, how would you know which was asked in the question?

Is it that payoff is different from the value of the option in which case we would use RFR to compute the value?

I am beginning to lose it..