$14.$ Suppose a Foreign Exchange call option is available on the Euro $()$ with a

strike price of $$1\mathrm{.}10.$ The exchange rate between the $$ and the $ is currently

$$1\mathrm{.}0796.$ The option expires in $4$ months or $0\mathrm{.}333$ years. The risk$-$free

interest rate is $5\mathrm{.}5\%$ and the standard deviation is computed as $0\mathrm{.}05$ or $5\%.$

Using the Black$-$Scholes Option Pricing Model, determine the value for d$1$ and

d$2.$ Next determine the price that you should pay for the call option per $.$

Suppose the call option for $$ calls for the delivery of $25,000$ per contract.

What is the intrinsic value of this option per unit of currency? You must show

all calculations on this problem.

d$1=$

d$2=$

Vc $=$

Premium $(1$ contract for $25,000)=$

Intrinsic Value$=$