Question: Assuming the same initial values for the dollar/pound cross rate in the FX Option Pricing workbook, how much more would a call option on pounds

Assuming the same initial values for the dollar/pound cross rate in the FX Option Pricing workbook, how much more would a call option on pounds be if the maturity was doubled from 90 to 180 days? What percentage increase is this for twice the length of maturity?

Pricing Currency Options on the Euro A U.S.-based firm wishing to buy or sell euros (the foreign currency) A European firm wishing to buy or sell dollars (the foreign currency) Variable Variable Value $1.2480 $1.2500 1.453% 2.1 87% alue Spot rate (domestic/toreign) Strike rate (domestic/toreign) Domestic interest rate (% pa) Foreign interest rate (% pa) Time (years, 365 days) 0.8013 21 87% 1.453% 1.000 365.00 1.000 365.00 10.500% $0.0461 $0.0570 Volatility (% pa) Call option premium (per unit fc) 0.0366 0.0295 European pricing) Call option premium (%) 456% 4.57% 3.68%

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