A call option on Australian dollars has a strike (exercise) price of $.56. The present exchange rate is $.59. This call option can be referred to as:
A) in the money.
B) out of the money.
C) at the money.
D) at a discount

Question

​A call option on Australian dollars has a strike (exercise) price of $.56. The present exchange rate is $.59. This call option can be referred to as:
A) ​in the money.
B) ​out of the money.
C) ​at the money.
D) ​at a discount

Quizplus · Accepted Answer

A call option is considered "in the money" when the current exchange rate is above the strike price, which means the option holder can buy the currency for less than its current market value. In this case, with a strike price of $.56 and a current exchange rate of $.59, the call option is indeed "in the money."

​A Call Option on Australian Dollars Has a Strike (Exercise)

A Call Option on Australian Dollars Has a Strike (Exercise)