Calculate a lower bound for value of option on currency, Finance Basics

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Calculate a lower bound for value of option on currency

Assignment:

A foreign currency is currently worth $1.50. The domestic and foreign risk-free interest rates are 5% and 9%, respectively. Calculate a lower bound for the value of a six-month call option on the currency with a strike price of $1.40 if it is (a) European and (b) American.

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Finance Basics: Calculate a lower bound for value of option on currency

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