For a European Call Option on a Currency,the Exchange Rate

question 15

Multiple Choice

For a European call option on a currency,the exchange rate is 1.0000,the strike price is 0.9100,the time to maturity is one year,the domestic risk-free rate is 5% per annum,and the foreign risk-free rate is 3% per annum.How low can the option price be without there being an arbitrage opportunity?

• A) 0.1048
• B) 0.0900
• C) 0.1344
• D) 0.1211

---

Definitions:

Hypoxia

A medical condition in which the body or a region of the body is deprived of adequate oxygen supply at the tissue level, which can lead to various symptoms and health issues.

Cyanosis

A bluish discoloration of the skin and mucous membranes due to insufficient oxygen in the blood.

Crackles

Abnormal lung sounds heard through a stethoscope, often resembling a crackling or popping noise, indicative of conditions like pneumonia or heart failure.

Full And Bounding

A description typically used for pulses, indicating a strong and easily palpable heartbeat.