Multiple Choice
The current spot exchange rate is $1.55 = €1.00; the three-month U.S. dollar interest rate is 2%. Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00. What is the least that this option should sell for?
A) $0.05 × 62,500 = $3,125
B) $3,125/1.02 = $3,063.73
C) $0.00
D) none of the above
Correct Answer:
Verified
Correct Answer:
Verified
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