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Option pricing- call option

Please see attached sheet for complete description of the problem.

British Pound Spot Price $1.55
Annual. 30-day sterling interest rate 10%
Annual. 30-day U.S. interest rate 8.50%
Annual. Stand. Dev. Of 17%
dollar:pound exchange rate

Calculate the value of a 30-day PHLX call option on the pound at a strike price of $1.57.


Solution Summary

The value of call option is calculated using Black-Scholes model.