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What is the value of the forward contract

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Reference no: EM133069865

The price of a 6-month European call option of 1 euro purchased at $1.60 is $0.147, and the price of a 6-month European put option of 1 euro sold at $1.60 is $0.050.

(a) A forward contract to buy 1 euro for C $1.60 will expire in six months. What is the value of the forward contract? And explain.

(b) The six-month risk-free interest rate in Canada is 6% per year (continuous compound interest). Combined with your answer to question (a), what is the forward exchange rate of Canadian dollar / euro for six months?

Reference no: EM133069865

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