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Suppose the Current Exchange Rate Is $1

Question 41

Multiple Choice

Suppose the current exchange rate is $1.62/£,the interest rate in the united states is 5.25%,the interest rate in the United Kingdom is 4%,and the volatility of the $/£ exchange rate is 18%.Using the Black-Scholes formula,the price of a six-month European call option on the British pound with a strike price of $1.60/£ will be closest to:


A) $0.040/£
B) $0.059/£
C) $0.078/£
D) $0.097/£

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