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Consider an option to buy 12,500 for 10,000. In the next period, the euro can strengthen against the pound by 25% (i.e. each euro will
Consider an option to buy 12,500 for 10,000. In the next period, the euro can strengthen against the pound by 25% (i.e. each euro will buy 25% more pounds) or weaken by 20%.
Big hint: don't round, keep exchange rates out to at least 4 decimal places.
Use your results from the last three questions to verify your earlier result for the value of the call.
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