Question
U.S. dollar/Japanese Yen. What would be the premium expense, in home currency, for a Japanese firm to purchase an option to sell 725 comma 000725,000
U.S. dollar/Japanese Yen. What would be the premium expense, in home currency, for a Japanese firm to purchase an option to sell
725 comma 000725,000
U.S. dollars, assuming the initial values listed in this table
| 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 | 105.85 | S0 | $ | 0.0095 | |||
| Strike rate (domestic/foreign) | X | JPY | 100.05 | X | $ | 0.0100 | |||
| Domestic interest rate (% p.a.) | rd | 0.085 | % | rd | 1.447 | % | |||
| Foreign interest rate (% p.a.) | rf | 1.447 | % | 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 | 7.3684 | c | $ | 0.0003 | |||
| Put option premium (per unit fc) | p | JPY | 3.0190 | p | $ | 0.0007 | |||
| (European pricing) | |||||||||
| Call option premium (%) | c | 6.9614 | % | c | 3.0900 | % | |||
| Put option premium (%) | p | 2.8520 | % | p | 7.3020 | % | |||
The premium expense, in home currency, is __________
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Financial Management Principles And Applications
Authors: Arthur J. Keown, J. William Petty, John D. Martin, Jr. Scott, David F.
10th Edition
0131450654, 9780131450653
