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i) The current exchange rate is 1.40 US dollars per Euro ii) The US dollar continuously compounded risk-free interest rate is 5% iii) The Euro
i) The current exchange rate is 1.40 US dollars per Euro
ii) The US dollar continuously compounded risk-free interest rate is 5%
iii) The Euro continuously compounded risk-free interest rate is 8%
Consider a 9-month dollar-denominated European put option on Euro that allows selling one Euro at the rate of 1.50 US dollars per Euro. A 9-month dollar denominated European call option with the same strike costs $0.0223. Find the premium of the 9-month dollar denominated put.
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