12. Suppose the current exchange rate is $1.84/£, the interest rate in the United States is 5.34%, the interest rate in the United Kingdom is 4.08%, and the volatility of the $/£ exchange rate is 10.7%. Use the Black-Scholes formula to determine the price of a six-month European call option on the British pound with a strike price of $1.84/£. The corresponding forward exchange rate is ？$/£. (Round to four decimal places.)
12. Suppose the current exchange rate is $1.84/£, the interest rate in the United States is 5.34%, the interest rate in the United Kingdom is 4.08%, and the volatility of the $/£ exchange rate is 10.7%. Use the Black-Scholes formula to determine the price of a six-month European call option on the British pound with a strike price of $1.84/£. The corresponding forward exchange rate is ？$/£. (Round to four decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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12.
Suppose the current exchange rate is $1.84/£, the interest rate in the United States is 5.34%, the interest rate in the United Kingdom is 4.08%, and the volatility of the $/£ exchange rate is 10.7%. Use the Black-Scholes formula to determine the price of a six-month European call option on the British pound with a strike price of $1.84/£.
The corresponding forward exchange rate is ？$/£.
(Round to four decimal places.)
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