Suppose that you observe a European option on a currency with an exchange rate of S0 and a foreign risk-free rate of . Which of the following inequalities correctly expresses the lower bound of the call?
a. Ce(S0,T,X) = Max[0,S0(1 + )-T + X(1 + r)-T]
b. Ce(S0,T,X) = Max[0,S0 - X(1 + )-T]
c. Ce(S0,T,X) = Max[0,S0(1 + )-T - X]
d. Ce(S0,T,X) = Max[0,S0(1 + )-T - X(1 + r)-T]
e. none of the above
Answer: D
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