Find the Dollar Value Today of a 1-Period At-The-Money Call $i _ {€ } = 2 \%$

question 58

Multiple Choice

Find the dollar value today of a 1-period at-the-money call option on €10,000.The spot exchange rate is €1.00 = $1.25.In the next period,the euro can increase in dollar value to $2.00 or fall to $1.00.The interest rate in dollars is i_$ = 27.50%; the interest rate in euro is $i _ {€ } = 2 \%$ .

• A)$3,308.82
• B)$0
• C)$3,294.12
• D)$4,218.75

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Definitions:

Assets

Resources owned by a business or individual, which have economic value and can be used to meet debts or commitments.

Interest Revenue

Income earned from lending money or through investing in interest-bearing assets.

Operating Income

Income generated from a company's regular business activities, excluding deductions of interest and taxes.

Operating Revenue

Income earned from a company's core business operations, excluding revenue from other sources.