U.S. Dollar/Japanese Yen. What would be the premium expense, in home currency, for a Japanese firm to purchase an option to sell 750,000 U.S. dollars, assuming the initial values listed in the FX Option Pricing workbook?

Transcribed Image Text:

So X Id If Spot rate (domestic/foreign) Strike rate (domestic/foreign) Domestic interest rate (% p.a.) Foreign interest rate (% p.a.) A U.S.-based firm wishing to buy or sell euros (the foreign currency) Variable A European firm wishing to buy or sell dollars (the foreign currency) Variable Value 0.8013 0.8000 2.187% 1.453% Value $1.2480 So $1.2500 X 1.453% Id 2.187% If Time (years, 365 days) Days equivalent T 1.000 T 1.000 365.00 Volatility (% p.a.) S 10.500% S 365.00 10.500% Call option premium (per unit fc) C $0.0461 C Put option premium (per unit fc) (European pricing) P $0.0570 P 0.0366 0.0295 Call option premium (%) C 3.69% Put option premium (%) P 4.57% 0 P 4.56% 3.68%