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Value of a Call Option using Black Scholes Equation

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Assume that the spot price of the British pound is $1.55, the annualized 30-day sterling interest rate is 10%, the annualized 30-day U.S. interest rate is 8.5%, and the annualized standard deviation of the dollar:pound exchange rate is 17%. Calculate the value of a 30-day PHLX call option on the pound at a strike price of $1.57.

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The solution calculates the value of a Call Option using Black Scholes Equation. A 30-day PHLX call option is examined for a strike price.

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Assume that the spot price of the British pound is $1.55, the annualized 30-day sterling interest rate is 10%, the annualized 30-day U.S. interest rate is 8.5%, and the annualized standard deviation of the dollar:pound exchange rate is 17%. Calculate the value of a 30-day PHLX call option on the pound at a strike price of $1.57.

British Pound Spot Price $1.55
Annual. 30-day sterling interest rate 10%
Annual. 30-day U.S. interest ...

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