Use black scholes model For questions 5 and 6, assume the spot exchange rate for euros...

Use black scholes model

For questions 5 and 6, assume the spot exchange rate for euros is 1.0949 (that is $1.0949 will purchase €1). If the risk free interest rate for US dollars is 1.451%, the risk free interest rate for euro area is -0.250% and the standard deviation of changes in the exchange rate is 0.1126. 5a. What is the price of a 3-month call option on euros with a strike price of 1.0965? b. What is the price of a 3-month call option on euros with a strike price of 1.0985?

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

ANSWER 1 : 0.02613

ANSWER 2 : 0.02513

I HAVE ROUNDED TO 2 DECIMALS AS NOTHING WAS MENTIONED.

PART 2

jeff jeffy answered 2 years ago

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