Calculate the lower bound for the price of an european call, Financial Management

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Calculate the lower bound for the price of an european call

Suppose that the current USD/EUR FX-rate is S = USD1.18/EUR, the i(US,1year) = 4%, and i(EUR,1year) = 1%.

1. Calculate the lower bound for the price of an European call option with strike price equal to USD 1.2/EUR and 1 year time to maturity.

2. Calculate the highest lower bound for the price of an American call option with strike price equal to USD 1.2/EUR and 1 year time to maturity.

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Financial Management: Calculate the lower bound for the price of an european call

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Financial Management: Calculate the lower bound for the price of an european call

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