Question
Consider a six-month call option written on 100,000 with a strike price of $1.00 = 1.00. The current exchange rate is $1.25 = 1.00; The
Consider a six-month call option written on 100,000 with a strike price of $1.00 = 1.00. The current exchange rate is $1.25 = 1.00; The U.S. risk-free rate is 5% over the period and the euro-zone risk-free rate is 4%. Assume that N(d1)=0.9989, and N(d2)=0.9985. What is the option value using the Black-Scholes model?
The answer is $25005
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Guardians Of Finance
Authors: James R. Barth, Gerard Caprio, Ross Levine
1st Edition
0262526840, 978-0262526845
