5 U.S. Dollar/Euro. The table, indicates that a 1-year call option on euros at a strike rate of $1.2498/ will cost the buyer $0.0533/ , or 4.22%. But that assumed a volatility of 10.500% when the spot rate was $1.2624 / . What would the same call option cost if the volatility was reduced to 10.500% when the spot rate fell to $1.2481 / ? ..... The same call option cost if the volatility was reduced to 10.500% when the spot rate fell to $1.24811 would be $/. (Round to four decimal places.) I. 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 Value Variable Value SO $ 1.2624 SO 0.7921 FO $ 1.2532 FO 0.7979 $ 1.2498 0.8001 rd 1.454 % rd 2.186 % Spot rate (domestic/foreign) Forward rate (domestic/foreign) Strike rate (domestic/foreign) Domestic interest rate (% p.a.) Foreign interest rate (% p.a.) Time (years, 365 days) Days equivalent Volatility (% p.a.) rf 2.186 % rf 1.454 % T 1.000 T 1.000 365.00 365.00 S 10.500 % S 10.500 % d1 0.0784 d1 0.0263 d2 -0.0266 d2 -0.0787 N(d1) 0.5312 N(1) 0.5105 N(D2) 0.4894 N(D2) 0.4686 $ 0.0533 0.0317 Call option premium (per unit fc) Put option premium (per unit fc) (European pricing) $ 0.0500 0.0338 4.22 % C 4.00 % Call option premium (%) Put option premium (%) 3.96 % 4.27 % 5 U.S. Dollar/Euro. The table, indicates that a 1-year call option on euros at a strike rate of $1.2498/ will cost the buyer $0.0533/ , or 4.22%. But that assumed a volatility of 10.500% when the spot rate was $1.2624 / . What would the same call option cost if the volatility was reduced to 10.500% when the spot rate fell to $1.2481 / ? ..... The same call option cost if the volatility was reduced to 10.500% when the spot rate fell to $1.24811 would be $/. (Round to four decimal places.) I. 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 Value Variable Value SO $ 1.2624 SO 0.7921 FO $ 1.2532 FO 0.7979 $ 1.2498 0.8001 rd 1.454 % rd 2.186 % Spot rate (domestic/foreign) Forward rate (domestic/foreign) Strike rate (domestic/foreign) Domestic interest rate (% p.a.) Foreign interest rate (% p.a.) Time (years, 365 days) Days equivalent Volatility (% p.a.) rf 2.186 % rf 1.454 % T 1.000 T 1.000 365.00 365.00 S 10.500 % S 10.500 % d1 0.0784 d1 0.0263 d2 -0.0266 d2 -0.0787 N(d1) 0.5312 N(1) 0.5105 N(D2) 0.4894 N(D2) 0.4686 $ 0.0533 0.0317 Call option premium (per unit fc) Put option premium (per unit fc) (European pricing) $ 0.0500 0.0338 4.22 % C 4.00 % Call option premium (%) Put option premium (%) 3.96 % 4.27 %