The existing spot rate of the euro is £0.68. The premium on a euro call option is £0.02. The exercise price is £0.70. The option will be exercised on the expiration date if at all. If the spot rate on the expiration date is £0.73, the profit as a percent of the initial investment (the premium paid) is:
A) 0 per cent.
B) 25 per cent.
C) 50 per cent.
D) 150 per cent.
E) none of the above

Question

Quizplus · Accepted Answer

The Answer of The existing spot rate of the euro is £0.68. The premium on a euro call option is £0.02. The exercise price is £0.70. The option will be exercised on the expiration date if at all. If the spot rate on the expiration date is £0.73, the profit as a percent of the initial investment (the premium paid) is:
A) 0 per cent.
B) 25 per cent.
C) 50 per cent.
D) 150 per cent.
E) none of the above

The Existing Spot Rate of the Euro Is £0