Call using the black-scholes option pricing model

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Reference no: EM131817916

Consider a call option on euro with a strike price of $ 1.20/€ in the following economy:

Current spot exchange rate = $ 1.20/€

U.S. dollar interest rate = 1 % per annum

Euro interest rate = 2 % per annum

Time until expiration = 9 months

Standard deviation of the spot rate = 15%

Compute the fair price of this euro call using the Black-Scholes option pricing model.

Reference no: EM131817916

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