On the basis of the following information, calculate the price of a call option on the Australian dollar: Spot exchange rate (USD/AUD)                                                      0.75 Exercise exchange rate (USD/AUD)                                                0.70 Interest rate on the US dollar (per cent per annum                           8 Interest rate on the Australian dollar (per cent per annum)             10 Time to expiry                                                                                      90 Standard deviation (per cent)                                                             10 Note:-

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates
Section: Chapter Questions
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On the basis of the following information, calculate the price of a call option on the Australian dollar:

Spot exchange rate (USD/AUD)                                                      0.75

Exercise exchange rate (USD/AUD)                                                0.70

Interest rate on the US dollar (per cent per annum                           8

Interest rate on the Australian dollar (per cent per annum)             10

Time to expiry                                                                                      90

Standard deviation (per cent)                                                             10

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