Questions: 10 | Attempts: 83 | Last updated: Jan 29, 2013
Using the Black Scholes formula, calculate the price of a 4-month European call option on the British pound. You are given the following details:
The current exchange rate is 1.3, the exercise price is 1.3. The risk free interest rate in the United States is 3% per annum whereas the risk free rate in Britain is 4% per annum. The annualized implied volatility in the exchange rate is 20%.
The European call option price is: