Solved

Use the Binomial Option Pricing Model to Find the Value

Question 48

Multiple Choice

Use the binomial option pricing model to find the value of a call option on £10,000 with a strike price of €12,500. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/€1.00 .
The current interest rates are i€ = 3% and are i£ = 4%.
Choose the answer closest to yours.


A) €3,275
B) €2,500
C) €3,373
D) €3,243 Use the binomial option pricing model to find the value of a call option on £10,000 with a strike price of €12,500. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/€1.00 . The current interest rates are i<sub>€</sub> = 3% and are i<sub>£</sub> = 4%. Choose the answer closest to yours. A) €3,275 B) €2,500 C) €3,373 D) €3,243 And thereby the value call is And thereby the value call is Use the binomial option pricing model to find the value of a call option on £10,000 with a strike price of €12,500. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/€1.00 . The current interest rates are i<sub>€</sub> = 3% and are i<sub>£</sub> = 4%. Choose the answer closest to yours. A) €3,275 B) €2,500 C) €3,373 D) €3,243 And thereby the value call is

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q11: Find the cost today of your hedge

Q14: Calculate the current €/£ spot exchange rate.

Q49: Which equation is used to define the

Q50: If the call finishes in-the-money what is

Q51: Three days ago, you entered into a

Q71: Yesterday,you entered into a futures contract to

Q82: For European options, what of the effect

Q86: Find the risk neutral probability of an

Q87: Which of the following is correct?<br>A)Time value

Q96: Use your results from the last three