a) Suppose the spot exchange rate is $1.22 per British pound and the strike on a dollar denominated pound put is $1.20. Assume r = 0.04, rf = 0.05, σ = 0.20 and the option expires in 270 days. What is the put option price?
[5 Marks]
b) Suppose the 180-day futures price on crude oil is $110.00 per barrel and the volatility is 20.0%. Assume interest rates are 3.5%. What is the price of a $120 strike call futures option that expires in 180 days? [5 Marks]