3)

a)A call option on British Pounds expires in 3 months and has an exercise price of $1.65 per . The current price of the call option is $.25 per . The current spot rate is S($/) 1.60. If the risk-free rate in the US is 1.5% per year, compounded continuously, and the risk-free rate in the UK is 2.5% per year, compounded continuously, at what price should the corresponding put option sell?

b)The current spot rate is S(/$) 89.00, and the 90-day forward rate is F90-day(/$) 92.00. In addition, 90-day CDs in the US currently pay 2% per year, compounded quarterly. If there are no arbitrage opportunities, what rate should be paid on a 90-day (yen-denominated) CD of similar risk in Japan?