Question
Consider five-month European call and put options on British pounds with an exercise price of $1.1700. The current price of the put option is
Consider five-month European call and put options on British pounds with an exercise price of $1.1700. The current price of the put option is $0.0416. The current spot price of British pounds is $1.1706. The riskless interest rate is 4% in the U.S. and 5% in the U.K. (both of these rates are annualized and continu- ously compounded). Given the price of the put option, what should be the current price of the call option? (Please report your answer to four decimal places.)
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To find the current price of the European call option we can use the putcall parity relationship whi...Get Instant Access to Expert-Tailored Solutions
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