Determine the Value of a European Foreign Currency Put If

question 20

Multiple Choice

Determine the value of a European foreign currency put if the call is at $0.05,the spot rate is $0.5702,the exercise price is $0.59,the domestic interest rate is 5.75 percent,the foreign interest rate is 4.95 percent and the options expire in 45 days.(The interest rates are continuously compounded. )

• A)$0.069
• B)$0.031
• C)$0.050
• D)$0.517
• E)none of the above

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Definitions:

Observations

The act of watching carefully with attention to details for the purpose of gathering data.

Experiment

A scientific procedure undertaken to test a hypothesis by manipulating and measuring variables to observe the effect.

Independent T-tests

A statistical test that compares the means of two independent groups in order to determine if there is a statistically significant difference between them.

Statistical Difference

A significant change or discrepancy between groups or conditions that is unlikely to have occurred by chance.