Consider a two year call on 10000000 the strike rate of the

Reference no: EM13621668

Consider a two year call on $10,000,000. The strike rate of the call is 105 Yen/$. This call gives you the option to pay Yen 1,050,000,000 and receive $10,000,000 exactly two years from today. Today's spot rate is 100 Yen/$. The two year Yen interest rate is 0.5%. The two year US$ interest rate is 2%. Use the spreadsheet option calculator to answer c, d and e. All interest rates are quoted on an annual basis.

a. What is the intrinsic value of the offered call?

b. What is the breakeven exchange rate on this call option if the premium is 20,000,000 Yen?

c. What is the price of the option if the volatility is 10%?

d. What is the price of the option if the volatility is 20%?

e. What is the implied volatility of the call if it is offered at a price of $500,000?

Reference no: EM13621668

Questions Cloud

A copper rod 0150 m long and with a mass of 00500 kg is : a copper rod 0.150 m long and with a mass of 0.0500 kg is suspended from two thin flexible wires. at right angles to

A proton is released from rest at the positive plate of a : a proton is released from rest at the positive plate of a parallel plate capacitor. it crosses the capacitor and

A solenoid is wound with a single layer of insulated copper : a solenoid is wound with a single layer of insulated copper wire of diameter 2.500 mm and has a diameter of 3.000 cm

Determine the cost of the power required incents per liter : a power washer used to clean the sidingof a hosue has water entering through a hose at 20c 1atm and avelocity of 0.2ms.

Consider a two year call on 10000000 the strike rate of the : consider a two year call on 10000000. the strike rate of the call is 105 yen. this call gives you the option to pay yen

A average human dna molecule contains 5 x 108 base-pairs : an average human dna molecule contains 5 x 108 base-pairs each of which could be regarded as a rung on the dna ladder

Mnufacturing inc expects to generate perpetual : manufacturing inc. expects to generate perpetual yearly operating cash flow of 800000 per year. the firm has

A person fishing from a pier observes thatsevenwave crests : a person fishing from a pier observes thatsevenwave crests pass by in 6.2s and estimates the distance between two

Would your expected return estimate change if the purpose : you have run a regression of monthly returns on a stock against monthly returns on the sampp 500 index and come up with

User Account

All Pages