What is the value in dollars of a derivative

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Reference no: EM131240833

What is the value in dollars of a derivative that pays off £10,000 in 1 year provided that the dollar/sterling exchange rate is greater than 1.5000 at that time?

The current exchange rate is 1.4800. The dollar and sterling interest rates are 4% and 8% per annum, respectively. The volatility of the exchange rate is 12% per annum.

Reference no: EM131240833

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