The USD-GBP (Pound Sterling) exchange rate is 1.38. The USD interest rate is 2% per annum, and the GBP interest rate is 1% per annum. According to the Black-Scholes-Merton model, what is the price of a European call option on the exchange rate with a strike price of 1.50 and maturing after 18 months. The volatility of the exchange rate is 20%. The contract multiplier is 100. a. $9.90 b. $12.28 c. $11.67 d. $9.43 e. $10.96
The USD-GBP (Pound Sterling) exchange rate is 1.38. The USD interest rate is 2% per annum, and the GBP interest rate is 1% per annum. According to the Black-Scholes-Merton model, what is the price of a European call option on the exchange rate with a strike price of 1.50 and maturing after 18 months. The volatility of the exchange rate is 20%. The contract multiplier is 100. a. $9.90 b. $12.28 c. $11.67 d. $9.43 e. $10.96
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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The USD-GBP (Pound Sterling) exchange rate is 1.38. The USD interest rate is 2% per annum, and the GBP interest rate is 1% per annum. According to the Black-Scholes-Merton model, what is the price of a European call option on the exchange rate with a strike price of 1.50 and maturing after 18 months. The volatility of the exchange rate is 20%. The contract multiplier is 100.
a.
$9.90
b.
$12.28
c.
$11.67
d.
$9.43
e.
$10.96
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