Answered: percent. Assume the annualized…

percent. Assume the annualized volatility of the Swiss franc is 14.20 percent. Use the European option-pricing models to value the call

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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Question

Assume the spot Swiss franc is $0.7050 and the six-month forward rate is $0.7050. What is the Value of a six-month call and a put
option with a strike price of $0.6850 should sell for in a rational market? Assume the annualized six-month Eurodollar rate is 3.50
percent. Assume the annualized volatility of the Swiss franc is 14.20 percent. Use the European option-pricing models to value the call
and put option. This problem can be solved using the FXOPM.xls spreadsheet. (Do not round intermediate calculations. Round your
answers to 2 decimal places.)
Option
Value
Call
cents
Put
cents

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