Question 2 (2.5 points)\

Saved\ Suppose that you observe a European option on a currency with an exchange rate of

S_(0)

and a foreign risk-free rate of

r

. Which of the following inequalities correctly expresses the lower bound of the call?\ a)

C_(e)(S_(0),(T),x)>=Max[0,S_(0)(1+r)^(-T)-x]

\ b)

C_(e)(S_(0),(T),x)>=Max[0,S_(0)(1+r)^(-T)+x(1+r)^(-T)]

\ c)

C_(e)(S_(0),(T),x)>=Max[0,S_(0)-x(1+r)^(-T)]

\ d)

C_(e)(S_(0),(T),x)>=Max[0,S_(0)(1+r)^(-T)-x(1+r)^(-T)]

\ e) none of the above

Suppose that you observe a European option on a currency with an exchange rate of S0 and a foreign risk-free rate of r. Which of the following inequalities correctly expresses the lower bound of the call? a) Ce(S0,T,X)Max[0,S0(1+r)TX] b) Ce(S0,T,X)Max[0,S0(1+r)T+X(1+r)T] c) Ce(S0,T,X)Max[0,S0X(1+r)T] d) Ce(S0,T,X)Max[0,S0(1+r)TX(1+r)T] e) none of the above