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Consider an option to buy €12,500 for £10,000.In the next period,the euro can strengthen against the pound by 25 percent (i.e.,each euro will buy 25 percent more pounds)or weaken by 20 percent.
Big hint: don't round,keep exchange rates out to at least 4 decimal places.
Find the value of the call.
Non Est Factum
A defense in contract law allowing a signing party to void the contract due to a fundamental misunderstanding of its nature.
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