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    Currency Derivatives and List of Factors

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    List the factors that affect currency call option premiums and briefly explain the relationship that exists for each. Do you think an at-the-money call option in euros has a higher or lower premium than an at-the-money call option in British pounds (assuming the expiration date and the total dollarvalue represented by each option are the same for both options)?

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    Solution Preview

    These factors are listed below:

    ?The higher the existing spot rate relative to the strike price, the greater is the call ...

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    $2.19

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