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show me the work A 1-year call option on the British pound has a strike price of $1.25/. The spot interest rate today is $1.30/
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A 1-year call option on the British pound has a strike price of $1.25/. The spot interest rate today is $1.30/ and the interest rates in the US and the UK are 1% and 2%, respectively. If the pound can only appreciate to $1.40/ or depreciate to $1.20/ in a year, which of the following statements is correct? The call option should be valued at $0.0648/ today. The call option value should be $0.20/ in a year if the pound appreciates. The risk-neutral probability of the pound appreciates is 45%. The hedge ratio of the call option is 25% Step by Step Solution
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