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the australian DOLLAR IS CURRENTLY 0.7100 U.S. DOLLARS AND THIS EXCHANGE RATE HAS VOLATILITY OF 12%,...

the australian DOLLAR IS CURRENTLY 0.7100 U.S. DOLLARS AND THIS EXCHANGE RATE HAS VOLATILITY OF 12%, THE AUSTRALIA RISK FREE RATE IS 9% AND THE US RISK FREE RATE IS 6%

using derivagem to value a six months american call option with a strike price of 0.6500,by using a four step tree, the value of the option is

A:$0.0426

B:$0.0526

C$0.0034

D$0.0698

E$0.0022

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Answer #1

D $0.0698

Volatility = 12%

Enter the following in Deriva-gem and get the option price

Hence, the value of the option is $0.0698

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