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)

Differentiate between negative and positive externalities.

Assess the effects of human activity on the environment.

Understand the role of market economies in regulating pollution levels.

Analyze the cost-benefit aspects of pollution in economic terms.

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Definitions:

Self-Fulfilling Tendencies

The phenomenon whereby a person's expectation or belief about a situation or themselves leads to its actualization or enactment.

Social Expectancies

Norms or beliefs about how people are supposed to behave in certain social situations, influencing interactions and perceptions.

Intellectual Expectancies

Preconceived standards or beliefs about intellectual abilities or outcomes that can influence behavior and performance.

Extraversion

A personality trait characterized by sociability, talkativeness, assertiveness, and high levels of emotional expressiveness.