Assume that the dollar-euro spot rate is $1.28 and the six-month forward rate is PT= S,ers - r= $1.28e 01 x 5 = $1.2864. %3D The six-month U.S. dollar rate is 5 percent and the Eurodollar rate is 4 percent. The minimum price that a six-month American call option with a striking price of $1.25 should sell for in a rational market is... (Note: If you are unable to view the image, you can download it here: forwardRate.png) O O cents. O 3.47 cents. O'3.55 cents. O 3 cents.

Assume that the dollar-euro spot rate is $1.28 and the six-month forward rate is PT= S,ers - r= $1.28e 01 x 5 = $1.2864. %3D The six-month U.S. dollar rate is 5 percent and the Eurodollar rate is 4 percent. The minimum price that a six-month American call option with a striking price of $1.25 should sell for in a rational market is... (Note: If you are unable to view the image, you can download it here: forwardRate.png) O O cents. O 3.47 cents. O'3.55 cents. O 3 cents.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 56QA

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Assume spot rate for Euro is $1.1900 and the three-month forward rate is $1.1710. What is the minimum price that a six-month American put option with a striking price of $1.220 should sell for in a rational market? Assume the annualized six-month Euro rate is 0.5 percent. O $0.0489 O $0 O $0.0300 $0.0389
Assume the spot Swiss franc is $0.7000 and the six-month forward rate is $0.6950. What is the minimum price that a six-month American call option with a striking price of $0.6800 should sell for in a rational market? Assume the annualized six-month Eurodollar rate is 3.5 percent. (Do not round intermediate calculations.)
Assume the spot Swiss franc is $0.7015 and the six-month forward rate is $0.6980. What is the Value of a six-month call and a put option with a strike price of $0.6815 should sell for in a rational market? Assume the annualized six-month Eurodollar rate is 3.50 percent. Assume the annualized volatility of the Swiss franc is 14.20 percent. Use the European option-pricing models to value the call and put option. This problem can be solved using the FXOPM.xls spreadsheet. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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4. Assume the following: The spot rate for the euro is $1.15 a. A call option is available with an exercise price of $1.17 and a premium of $0.02 per unit. Expectation of euro's spot rate as of the settlement date is $1.20 What could you do to profit from your expectations? b. The euro is worth $1.15, and the Canadian dollar is worth $0.60. What is the value of the euro in Canadian dollars?
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