Question: i) The current exchange rate is 1.40 US dollars per Euro ii) The US dollar continuously compounded risk-free interest rate is 5% iii) The Euro

i) The current exchange rate is 1.40 US dollars per Euro

ii) The US dollar continuously compounded risk-free interest rate is 5%

iii) The Euro continuously compounded risk-free interest rate is 8%

Consider a 9-month dollar-denominated European put option on Euro that allows selling one Euro at the rate of 1.50 US dollars per Euro. A 9-month dollar denominated European call option with the same strike costs $0.0223. Find the premium of the 9-month dollar denominated put.

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