A European At-The-Money Call Option on a Currency Has Four

question 12

Multiple Choice

A European at-the-money call option on a currency has four years until maturity.The exchange rate volatility is 10%,the domestic risk-free rate is 2% and the foreign risk-free rate is 5%.The current exchange rate is 1.2000.What is the value of the option?

• A) 0.98N(0.25)-1.11(0.05)
• B) 0.98N(-0.3)-1.11N(-0.5)
• C) 0.98N(-0.5)-1.11N(-0.7)
• D) 0.98N(0.10)-1.11N(0.06)

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