1a) Suppose the exchange rate is $1.75/, the British pound-denominated continuously compounded interest rate is 4%, the U.S. dollar-denominated continuously compounded interest rate is 5%, and the exchange rate volatility is 21%. What is the Black-Scholes value of a 9-month $1.80-strike European call on the British pound?

Answers:	a. $0.1429
	b. $0.1194
	c. $0.1574
	d. $0.1074
	e. $0.0000

1b)

Let S = $49, s = 40%, and r = 5.5% (continuously compounded). The stock is set to pay a single dividend of $1.30 nine months from today, with no further dividends expected this year. Use the Black-Scholes model (adjusted for the dividend) to compute the value of a one-year $50-strike European put option on the stock.

Answers:	a. $8.49
	b. $7.32
	c. $6.81
	d. $7.75
	e. $5.51