You wish to buy a Euro Call Option expiring in 6 months with a strike price of $1.15. The volatility of the $/Euro exchange rate is expected to be 8.36% on an annualized basis. Currently the interest rate on the euro is currently 0.00% whereas it is 1.75% on the dollar.

What is the price of this call option?

What is corresponding Put Option worth?

What happens to the price of both the Call and Put Option when the volatility goes to 10%. What are the new prices?

What happens to the price of both the Call and Put Option as we get closer to the expiration date? What is the new price of the call if no other factors change but we are 3-months away from expiration?

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