Suppose the Current Exchange Rate Is $1

question 41

Multiple Choice

Suppose the current exchange rate is $1.62/£,the interest rate in the united states is 5.25%,the interest rate in the United Kingdom is 4%,and the volatility of the $/£ exchange rate is 18%.Using the Black-Scholes formula,the price of a six-month European call option on the British pound with a strike price of $1.60/£ will be closest to:

• A)$0.040/£
• B)$0.059/£
• C)$0.078/£
• D)$0.097/£

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Definitions:

Cohort Effect

A cohort refers to people born at roughly the same time, and a cohort effect refers to differences in age cohorts (e.g., people born in 1930 versus those born in 1980) as a result of unique social and historical events they have experienced.

Cross-Sectional Surveys

Research tools used to gather information from a sample population at one specific point in time to analyze trends or patterns.

Theoretical Frameworks

Structured sets of concepts and ideas that guide academic research and interpretation of data.

Freud

Sigmund Freud was an Austrian neurologist and the founder of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.