42-An American importer imported the goods from the UK for £62,500 and fears an appreciation in Pound and purchased a call option. Options are available at a strike price of $1.830/£ with a premium of $0.03/£. The spot rate on maturity rises to $1.930/£. Which one of the following is the gain (or) loss to the buyer of the call option? O a. Call option gives loss $4,375 to the importer O b. Call option gives gain $3,475 to the importer O c. None of the options O d. Call option gives gain $4,375 to the importer
42-An American importer imported the goods from the UK for £62,500 and fears an appreciation in Pound and purchased a call option. Options are available at a strike price of $1.830/£ with a premium of $0.03/£. The spot rate on maturity rises to $1.930/£. Which one of the following is the gain (or) loss to the buyer of the call option? O a. Call option gives loss $4,375 to the importer O b. Call option gives gain $3,475 to the importer O c. None of the options O d. Call option gives gain $4,375 to the importer
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 21QA
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42-An American importer imported the goods from the UK for £62,500 and fears an appreciation in Pound and purchased a call option. Options are available at a strike price of $1.830/£ with a premium of $0.03/£. The spot rate on maturity rises to $1.930/£. Which one of the following is the gain (or) loss to the buyer of the call option?
O a. Call option gives loss $4,375 to the importer
O b. Call option gives gain $3,475 to the importer
O c. None of the options
O d. Call option gives gain $4,375 to the importer
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