U.S. dollar/Japanese Yen. What would be the premium expense, in home currency, for a Japanese firm to purchase an option to sell 800,000 U.S. dollars,
U.S. dollar/Japanese Yen. What would be the premium expense, in home currency, for a Japanese firm to purchase an option to sell 800,000 U.S. dollars, assuming the initial values listed in this table
The premium expense, in home currency, is
yen____
(Round to two decimal places.)
| Pricing Currency Options on the Japanese Yen | |||||||||
| A Japanese firm wishing to buy | A U.S.-based firm wishing to buy | ||||||||
| or sell dollars (the foreign currency) | or sell yen (the foreign currency) | ||||||||
| Variable | Value | Variable | Value | ||||||
| Spot rate (domestic/foreign) | S0 | JPY | 105.77 | S0 | $ | 0.0095 | |||
| Strike rate (domestic/foreign) | X | JPY | 100.12 | X | $ | 0.0100 | |||
| Domestic interest rate (% p.a.) | rd | 0.085 | % | rd | 1.449 | % | |||
| Foreign interest rate (% p.a.) | rf | 1.449 | % | rf | 0.085 | % | |||
| Time (years, 365 days) | T | 1.000 | T | 1.000 | |||||
| Days equivalent | 365.00 | 365.00 | |||||||
| Volatility (% p.a.) | s | 12.000 | % | s | 12.000 | % | |||
| Call option premium (per unit fc) | c | JPY | 7.2813 | c | $ | 0.0003 | |||
| Put option premium (per unit fc) | p | JPY | 3.0600 | p | $ | 0.0007 | |||
| (European pricing) | |||||||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Authors: Roger Staiger
2nd Edition
1138046183, 978-1138046184
