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For a European Call Option on a Currency,the Exchange Rate

Question 15

Multiple Choice

For a European call option on a currency,the exchange rate is 1.0000,the strike price is 0.9100,the time to maturity is one year,the domestic risk-free rate is 5% per annum,and the foreign risk-free rate is 3% per annum.How low can the option price be without there being an arbitrage opportunity?


A) 0.1048
B) 0.0900
C) 0.1344
D) 0.1211

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