The Current Nikkei Index Price Is 21,200

question 10

Multiple Choice

The current Nikkei index price is 21,200.Assume σ = 0.13,r = 0.05 and div = 0.015.If K = 20,000 yen and yen per dollar spot rates are 103,what is the dollar value of a 2-year call?

• A) $13.97
• B) $18.97
• C) $23.97
• D) $28.97

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Definitions:

Expected Rate of Return

The average return that an investor anticipates to earn on an investment, considering all potential outcomes and their probabilities.

Expected Return

The weighted average of all possible returns for a given investment, considering the probabilities of each outcome.

Standard Deviation

A measure of the dispersion or variability of a set of data points or investment returns, indicating the degree of risk or volatility.

Risk-Free Asset

An investment with a guaranteed return and no risk of financial loss, typically represented by government bonds.