Question

You are given: (i) The spot exchange rate is 1.7 $/ £ (ii) The continuously compounded...

You are given:

(i) The spot exchange rate is 1.7 $/ £

(ii) The continuously compounded risk-free rate in dollars in 6.3%

(iii) The continuously compounded risk-free rate in pounds sterling is 3.4%

(iv) a 6-month dollar-denominated European put option on pounds with a strike of 1.7 $ /£ costs $0.04

(Question 6)

For conditions in Problem 5, determine the premium in pounds of a 6-month denominated European put option on dollars with a strike of 1/1.7 £/$.

Math   Advanced-Math   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The current exchange rate is 0.70472 euros per dollar. The continuously compounded risk-free interest rate for...
The current exchange rate is 0.70472 euros per dollar. The continuously compounded risk-free interest rate for dollars and for euros are equal at 4%. An n-month dollar-denominated European call option has a strike price of $1.50 and a premium of $0.0794. An n-month dollar-denominated European put option on one euro has a strike price of $1.50 and a premium of $0.1596. Calculate n Formulas would be greatly appreciated
You are given (1) A stock's price is 45. (2) The continuously compounded risk-free rate is...
You are given (1) A stock's price is 45. (2) The continuously compounded risk-free rate is 6%. (3) The stock's continuous dividend rate is 3%. A European 1-year call option with a strike of 50 costs 6. Determine the premium for a European 1-year put option with a strike of 50.
Suppose the exchange rate is $1.54/£, the British pound-denominated continuously compounded interest rate is 2%, the...
Suppose the exchange rate is $1.54/£, the British pound-denominated continuously compounded interest rate is 2%, the U.S. dollar-denominated continuously compounded interest rate is 5%, and the price of a 6-month $1.60-strike European call on the British pound is $0.1614. What is the value of a 6-month $1.60-strike European put on the British pound? Answers: a. $0.2024 b. $0.1972(Correct answer) c. $0.1797 d. $0.2435 e. $0.2214. Please show all your work, thank you.
Suppose the exchange rate is $1.23/C$, the Canadian dollar-denominated continuously compounded interest rate is 8%, the...
Suppose the exchange rate is $1.23/C$, the Canadian dollar-denominated continuously compounded interest rate is 8%, the U.S. dollar-denominated continuously compounded interest rate is 5%, and the price of a 1-year $1.25-strike European call on the Canadian dollar is $0.0974. What is the value of a 1-year $1.25-strike European put on the Canadian dollar? a. $0.1361 b. $0.0813 c. $0.1510 d. $0.1174 e. $0.1617
Suppose the exchange rate is $1.29/Fr, the Swiss franc-denominated continuously compounded interest rate is 7%, the...
Suppose the exchange rate is $1.29/Fr, the Swiss franc-denominated continuously compounded interest rate is 7%, the U.S. dollar-denominated continuously compounded interest rate is 5%, and the exchange rate volatility is 24%. What is the Black-Scholes value of a 3-month $1.30-strike European call on the Swiss franc? Correct answer is $.0533 Please answer by hand, no excel. Thank you!
Suppose the spot $/Yen exchange rate is 0.008, the 1-year continuously compounded dollar- denominated rate is...
Suppose the spot $/Yen exchange rate is 0.008, the 1-year continuously compounded dollar- denominated rate is 5% and the 1-year continuously compounded yen-denominated rate is 1%. Suppose the 1-year forward exchange rate is 0.0084. Explain precisely the transactions you could use (being careful about currency of denomination) to make money with zero initial investment and no risk. What is such a strategy being referred to in the markets?
A nine-month dollar-denominated call option on euros with a strike price of $1.30 is values at...
A nine-month dollar-denominated call option on euros with a strike price of $1.30 is values at $0.06. A nine-month dollar-dominated put option on euros with the same strike price is valued at 0.18. The current exchange rate is $1.2/euro and the continuously compounded risk-free rate on dollar is 7%. What is the continuously compounded risk-free rate on euros? Formulas would be greatly appreciated
You writes a three-year 150-strike European put with a premium of$12. The continuously compounded risk-free interest...
You writes a three-year 150-strike European put with a premium of$12. The continuously compounded risk-free interest rate is 5%. Calculate the difference between the maximum profit and the minimum profit.
Suppose the 6-month risk free spot rate in HKD is 1% continuously compounded, and the 6-month...
Suppose the 6-month risk free spot rate in HKD is 1% continuously compounded, and the 6-month risk free rate in NZD is 3% continuously compounded. The current exchange rate is 5 HKD/NZD. a. Suppose again that our usual assumptions hold, i.e., no constraints or other frictions. Suppose you can enter a forward contract to buy or sell NZD 1 for HKD 5. Is there an arbitrage? If yes, describe an arbitrage strategy. If no, briefly explain why not. b. Suppose...
a) A stock currently sells for $33.75. A 6-month call option with a strike price of...
a) A stock currently sells for $33.75. A 6-month call option with a strike price of $33 has a premium of $5.3. Let the continuously compounded risk-free rate be 6%. What is the price of the associated 6-month put option with the same strike (to the nearest penny)?    Price = $ ------------------- b) A stock currently sells for $34.3. A 6-month call option with a strike price of $30.9 has a premium of $2.11, and a 6-month put with...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT