Q-41. Solution: A

$$d_1 = \frac{\ln(1.34/1.40) + \left(4\% - 3\% + \frac{30\%^2}{2}\right) \times 1}{30\%\sqrt{1}} = 0.0373$$ $$d_2 = d_1 - 30\%\sqrt{1} = -0.2627$$ $$N(d_1) = 0.5149 \quad \text{and} \quad N(d_2) = 0.3964$$

The foreign risk-free rate replaces the dividend yield, such that:

c = 1.34e^{-3\%}N(d_1) - 1.40e^{-4\%}N(d_2) = \$0.1364 $$_