Suppose the current exchange rate is $1.42/€, the interest rate in the United States is 4.00%,...

Suppose the current exchange rate is $1.42/€, the interest rate in the United States is 4.00%, the interest rate in the EU is 6%, and the volatility of the $/€ exchange rate is 20%.

(a). Using the Black-Scholes formula, calculate the price of a three-month European call option on the Euro with a strike price of $1.45/€.

The price of a three-month European call option is-------- $ (round to five decimal places).

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Expert Solution

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

jeff jeffy answered 1 year ago

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