The Dollar-Euro Exchange Rate Is $1

Multiple Choice

The dollar-euro exchange rate is $1.30/€. The dollar interest rate is 2% and the euro interest rate is 3%. What is the price of a six-month call option to buy euros at a strike price of $1.25/€? The volatility of the $/€ exchange rate is 40%.

A) $0.82
B) $0.86
C) $0.96
D) $1.06