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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Definitions:

Dramatism

A method of analysis used in communication and sociolinguistics, viewing life as a drama and understanding human interaction through narrative contexts.

Empiricism

A philosophical approach that emphasizes the role of experience and evidence from the senses in the formation of knowledge.

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Information that can be proven with evidence.

Qualitative Research

A research method focused on understanding phenomena from a human perspective, often involving collecting and analyzing non-numerical data such as text, images, or videos.