Mohamed is going to receive $20,000$ USD from USA as an

exporter in three months' time. He wants to reduce the forex

risk since the Turkish lira is quite fluctuated recently.

Therefore, he could subscribe to what kind of options?

Why? $(5$ marks$)$

Adham is going to pay $10,000$ USD to Japan as an importer

in one$-$month time. He worries the Turkish lira to be

depreciated since the Lira is quite volatile recently.

Therefore, in order to reduce his risk, he could subscribe to

what kind of options? Why? $(5$ marks$)$

Calculate the value of the following call and put options

by using of Binomial Option Pricing Model $(25$ marks$)$

Type of option A call or a Put options with exercise price of $$40,$

maturity is $1$ year

Price changes Assume that the price changes $3$ times per year

Price volatility Assume that the volatility of the stock is $25\%$

Probability Up $50\%$

Down $50\%$

Risk$-$free interest rate $15\%$ per year

Face value of sukuk

Left to Maturity

Exercise Price

Current price of the stock

$6-$Month LIBOR

USD $10000$

$6$ months

USD $50$

USD $55$

$8\%$

Estimated stock's price volatility $25\%$

What is the value of the above embedded call option according

to Black$-$Scholes Option Pricing Model? $(25$ marks$)$