Find the Value of a One-Year Call Option on €10,000

question 38

Multiple Choice

Find the value of a one-year call option on €10,000 with a strike price of $15,000. In one year the exchange rate (currently S₀($/€) = $1.50/€) can increase by 60% or decrease by 37.5% . The current one-year interest rate in the U.S. is i_$ = 4% and the current one-year interest rate in the euro zone is i_€ = 4%.

• A)€1,525.52
• B)$3,328.40
• C)$4,992.60
• D)€2,218.94
• E)None of the above

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Definitions:

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Topical Medication

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