Find the Black-Scholes Price of a Six-Month Call Option Written

question 1

Multiple Choice

Find the Black-Scholes price of a six-month call option written on €100,000 with a strike price of $1.00 = €1.00. The current exchange rate is $1.25 = €1.00; The U.S. risk-free rate is 5% over the period and the euro-zone risk-free rate is 4%. The volatility of the underlying asset is 10.7 percent.

• A)C_e = $0.63577
• B)C_e = $0.0998
• C)C_e = $1.6331
• D)none of the above

---

Definitions:

Nondirectional Research Hypothesis

A hypothesis suggesting a correlation between variables without defining the nature of their interaction.

Generalizability

The extent to which the findings from a study can be applied to a wider population or different contexts.

Null Hypothesis

A statement that asserts there is no effect or no difference, and it is the hypothesis that researchers aim to test against.

Directional Hypothesis

A hypothesis that specifies the direction of an anticipated difference or relationship between variables.