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U.S. Dollar-Euro. The table, , indicates that a 1-year call option on euros at a strike rate of $1.2499=1.00 will cost the buyer $0.0461 per
U.S. Dollar-Euro. The table, , indicates that a 1-year call option on euros at a strike rate of $1.2499=1.00 will cost the buyer $0.0461 per , or 3.69%. But that assumed a volatility of 10.500% when the spot rate was $1.2481=1.00. What would that same call option cost if the volatility was reduced to 10.500% when the spot rate fell to $1.2485=1.00? The same call option cost if the volatility was reduced to 10.500% when the spot rate fell to $1.2485=1.00 would be $l. (Round to four decimal places.) Pricing Currency Options on the Euro A U.S.-based firm wishing to buy A European firm wishing to buy or sell euros (the foreign currency) or sell dollars (the foreign currency)
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