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Find the Value of a Call Option Written on €100

Question 61

Multiple Choice

Find the value of a call option written on €100 with a strike price of $1.00 = €1.00. In one period there are two possibilities: the exchange rate will move up by 15% or down by 15% . The U.S. risk-free rate is 5% over the period. The risk-neutral probability of dollar depreciation is 2/3 and the risk-neutral probability of the dollar strengthening is 1/3. Find the value of a call option written on €100 with a strike price of $1.00 = €1.00. In one period there are two possibilities: the exchange rate will move up by 15% or down by 15% . The U.S. risk-free rate is 5% over the period. The risk-neutral probability of dollar depreciation is <sup>2</sup>/<sub>3</sub> and the risk-neutral probability of the dollar strengthening is <sup>1</sup>/<sub>3</sub>. A) $9.5238 B) $0.0952 C) $0 D) $3.1746


A) $9.5238
B) $0.0952
C) $0
D) $3.1746

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