Dollar and sterling exchange rate

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What is the value in dollars of a derivative that pays off 10,000 sterling in one year provided that the dollar/sterling exchange rate is greater than 1.50 at that time? The current exchange rate is 1.48. The dollar and sterling interest rates are 4% and 8% per annum, respectively. The volatility of the exchange rate is 12% per annum.

Reference no: EM132023321

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