Discounting strike price of option

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sachin_patel

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I came across a schweser example for minimum price for europian option like 110 days, it discounted using 365day risk free rate.
I thought general assumption of risk free rate is LIBOR which is 360 days. I keep discounting at 360 days and result in slight decimal error.
why do we discount at 365?
 
Consider a call option expiring in 110 days on a non-dividend-paying stock trading at 27 when the risk-free rate is 6%. The lower bound for a call option with an exercise price of 25 is:
A. $2.00.
B. $1.97.
C. $2.44.
27 - 25/(1.06)^(110/365) = 2.435. Answer: C
 
This isn’t LIBOR; if it were, you wouldn’t be compounding it.
If they want you to use LIBOR, they’ll tell you it’s LIBOR.
 
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