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    Option pricing- call option

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    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.

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    Solution Summary

    The value of call option is calculated using Black-Scholes model. The dollar and pound exchange rates are examined.