The current spot rate of the Hong Kong dollar against the pound is S0£/HK$ = £0.10/HK$. The standard deviation of continuously compounded annual changes is estimated to be 10%. What price is two standard deviations below the current exchange rate?
A) £0.0778/HK$
B) £0.0800/HK$
C) £0.0819/HK$
D) £0.0900/HK$
E) Cannot be determined from the information given
Correct Answer:
Verified
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