Question: Use the values from the image below, unless or until stated otherwise in any part of the question. Problem 1 EUR rate= -1%, US rate

Use the values from the image below, unless or until stated otherwise in any part of the question. Problem 1 EUR rate= -1%, US rate = 3%, in perpetuity What is the fair Price for trading EURUSD in 1 year from

EURUSD spot = 1.2500 Expiry for each option = 1 year Notional = EUR 100 million All rates are

Problem 1 EUR rate= -1%, US rate = 3%, in perpetuity What is the fair Price for trading EURUSD in 1 year from now? (i.e., in 1 year, how many USD should a rational investor be willing to pay to buy EUR 1?) Problem 2 What is the Payout at expiry, in USD, and in EUR? For each option, Strike = ATM forward (A) EURUSD call (i.e., EUR call USD put) Spot at expiry = 1.3500 (B) EURUSD put (i.e., EUR put USD call) Spot at expiry = 1.2500

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