European at-the-money call option

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A European at-the-money call option on a currency has four years until maturity. The exchange rate volatility is 10%, the domestic risk-free rate is 2% and the foreign risk-free rate is 5%. The current exchange rate is 1.2000.

a) What is the value of that call option (Use the Black Scholes Model)?

b) Assume that in the question 3 above the option is a put, other things remaining same, what would be the value of that put option (use the Black Scholes Model)?

Reference no: EM131571079

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