Pricing Currency Options on the British pound A U.S.-based firm wishing to buy A European-based firm wishing to buy or sell pounds (the foreign currency) or sell dollars (the foreign currency) Variable Value Variable Value Spot rate (domestic/foreign) S0 $ 1.8674 S0 0.5355 Forward rate (domestic/foreign) F0 $ 1.8533 F0 0.5396 Strike rate (domestic/foreign) X $ 1.8000 X 0.5556 Domestic interest rate (% p.a.) rd 1.453 % rd 4.525 % Foreign interest rate (% p.a.) rf 4.525 % rf 1.453 % Time (years, 365 days) T 0.247 T 0.247 Days equivalent 90s 90s Volatility (% p.a.) s 9.400 % s 9.400 % d1 0.6480 d1 -0.60212 d2 0.60128 d2 -0.64884 N(d1) 0.74151 N(d1) 0.27355 N(d2) 0.72617 N(d2) 0.25822 Call option premium (per unit fc) c $ 0.06689 c 0.0041 Put option premium (per unit fc) p $ 0.0138 p 0.0199 (European pricing) Call option premium (%) c 3.58 % c 0.77 % Put option premium (%) p 0.7390 % p 3.72 %

U.S. Dollar-British Pound. Assuming the same initial values for the U.S. dollar-British pound cross-rate in this table , how much more would a call option on pounds be if the maturity was doubled from 90 to 180 days? What percentage increase is this for twice the length of maturity? If the maturity increases from 90 to 180 days, a call option on pounds would be $1. (Round to six decimal places.) U.S. Dollar-British Pound. Assuming the same initial values for the U.S. dollar-British pound cross-rate in this table , how much more would a call option on pounds be if the maturity was doubled from 90 to 180 days? What percentage increase is this for twice the length of maturity? If the maturity increases from 90 to 180 days, a call option on pounds would be $1. (Round to six decimal places.)