Suppose the exchange rate is $1.09/A$, the Australian dollar-denominated continuously compounded interest rate is 2%,...
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Suppose the exchange rate is $1.09/A$, the Australian dollar-denominated continuously compounded interest rate is 2%, the U.S. dollar-denominated continuously compounded interest rate is 6%, and the exchange rate volatility is 19%. What is the Black-Scholes value of a 9-month $0.95-strike European call on the Australian dollar?
Option C is correct, but how? Can you provide solution for Excel? formulas and steps or actual excel work sheet please?
Answers:
a. $0.1683
b. $0.0131
c. $0.1786
d. $0.0386
e. $0.1400
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