> stream My Courses Question 3 Not yet wwered Marked out of 5.00 Page (5 marks] An American Hedge Fund is considering a one-year investment in an italian government bond with a one-year maturity and a euro-denominated rate of retum of 1-5%. The bond costs 1,000 today and will return 1,050 at the end of one year without risk. The current exchange rate is 1.00 = $1.50 US. collar denominated government bonds currently have a yield to maturity of 4 percent. Suppose that the European Central Bank is considering either tightening or loosening its monetary policy. It is widely believed that in one year there are only two possibilities S1 (S/E) = 1.80 per Si (S/) = 1.40 per Following revaluation, the exchange rate is expected to remain steady for at east another year. Your banker cuotes the euro-zone risk-free rate at le = 5% and the U.S. risk free rate at is = 4% What is the value of the option? Select one O a. $86.54 O b. $16.54 c. $80.55 O d. $66.55 O e. $76.54 Time left 1:59:17 > stream My Courses Question 3 Not yet wwered Marked out of 5.00 Page (5 marks] An American Hedge Fund is considering a one-year investment in an italian government bond with a one-year maturity and a euro-denominated rate of retum of 1-5%. The bond costs 1,000 today and will return 1,050 at the end of one year without risk. The current exchange rate is 1.00 = $1.50 US. collar denominated government bonds currently have a yield to maturity of 4 percent. Suppose that the European Central Bank is considering either tightening or loosening its monetary policy. It is widely believed that in one year there are only two possibilities S1 (S/E) = 1.80 per Si (S/) = 1.40 per Following revaluation, the exchange rate is expected to remain steady for at east another year. Your banker cuotes the euro-zone risk-free rate at le = 5% and the U.S. risk free rate at is = 4% What is the value of the option? Select one O a. $86.54 O b. $16.54 c. $80.55 O d. $66.55 O e. $76.54 Time left 1:59:17