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Assume the spot Swiss franc is 86.4 cents and the six-month forward rate is 85.5 cents. Suppose there is a six-month European call option with

Assume the spot Swiss franc is 86.4 cents and the six-month forward rate is 85.5 cents. Suppose there is a six-month European call option with a striking price of 79.5 cents. Assume the annualized volatility of the Swiss franc is 18.8%, and the annualized six-month Eurodollar rate is 4.5%. Use the European option-pricing models developed in the chapter to value the call option. Do the valuation again assuming a put option. This problem can be solved using the FXOPM.xls spreadsheet (posted in this lesson).

The option premium of the call option is ______ cents per Swiss Franc, and the option premium of the put option is ______ cents per Swiss Franc. Please use quotes in cents with two decimal places when you calculate the option premium. Use 365 days for a year.

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