Compute the call price and put price

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Reference no: EM13953603

Suppose the spot exchange rate for Narnianly currency is trading for $2/N and one year later it can go up to $2.5/N, an increase of 25 percent, or down to $1.80/N, a decrease of 10 percent. assume intiallly that the U.S. interest rate is 1 percent and that the Narnian interest rate is 5 percent. Assume that the interest rate is based on annual compounding and round at the 5th decimal place.

a) compute the call price

b) compute the put price

Reference no: EM13953603

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