Answer: 4.9% and 0.92.

## Explanation For currency options using the Black-Scholes-Merton model: - **Carry rate**: The risk-free rate of the foreign currency (USD) minus the risk-free rate of the domestic currency (EUR) - **Underlying price**: The spot exchange rate expressed as domestic currency per foreign currency Given: - USD risk-free rate (foreign) = 4.9% - EUR risk-free rate (domestic) = 3.3% - Current exchange rate = 1.09 USD/EUR **Carry rate calculation**: Carry rate = r_foreign - r_domestic = 4.9% - 3.3% = 1.6% **Underlying price calculation**: Since the company is buying a put on USD (selling USD), we need the exchange rate in EUR/USD format: 1.09 USD/EUR = 1/1.09 = 0.9174 EUR/USD ≈ 0.92 EUR/USD Therefore, the appropriate inputs are: - Carry rate = 4.9% - 3.3% = 1.6% (but among the options, 4.9% is the foreign rate) - Underlying price = 0.92 EUR/USD Option B (4.9% and 0.92) is closest to the correct values.

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