What is the definition of a call option (write it down in words as part of your answer)? Suppose you are the operator of the East Lima International Refinery LLC, and you buy a call option for crude oil to refine in 2022. Your call option has a strike price of $72.42 per barrel, with no option premium, and it expires on September 30, 2022. If the actual price on September 30, 2022 is $73 per barrel, do you exercise the option? Why or why not? Show any work and explain your answer carefully.

What is the definition of a call option (write it down in words as part of your answer)? Suppose you are the operator of the East Lima International Refinery LLC, and you buy a call option for crude oil to refine in 2022. Your call option has a strike price of $72.42 per barrel, with no option premium, and it expires on September 30, 2022. If the actual price on September 30, 2022 is $73 per barrel, do you exercise the option? Why or why not? Show any work and explain your answer carefully.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 4ST

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