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You are reading in the newspaper about the cost of various currency options. In particular, you note that among options expiring in 2 years, a
You are reading in the newspaper about the cost of various currency options. In particular, you note that among options expiring in 2 years, a call option on 1 Yen with strike 125 Yen/$ has a cost of $0.0015, while a put option on Yen at the same strike has a unit cost of only $0.0005. Additionally, you observe that the risk-free rate for Yen is 3%, while the risk-free rate for $ is 7.5%. What do you conclude that the current exchange rate must be?
A. 0.008373 $/
B. 0.008678 $/
C. 0.009062 $/
D. 0.009162 $/
E. 0.009915 $/
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