Question

The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. consider a three-month american call option on €62,500. for this option to be considered at-the-money, the strike price must be

Answer 1

The strike price must be $1.55 = €1.00

Explanation:

Dollar is the name of the currency used in America. Euro is the name of the currency used in European countries.

Strike price is a fixed price at which the product is purchased or sold.

Given:

The exchange rate of currency = $1.55 = €1.00

Three-month forward rate = $1.60 = €1.00

The strike price must be $1.55 = €1.00