If the Canadian dollar became stronger relative to the U.S. dollar, the price of
A) a call option on the Canadian dollar will increase.
B) a put option on the Canadian dollar will increase.
C) a call option on the Canadian dollar will decrease.
D) both the call and the put options on the Canadian dollar will decrease.

Question

Quizplus · Accepted Answer

When the Canadian dollar strengthens relative to the U.S. dollar, it means that each Canadian dollar can buy more U.S. dollars. Therefore, a call option, which gives the holder the right to buy the Canadian dollar at a specific price, becomes more valuable because the holder can buy the Canadian dollar at the strike price and sell it at the higher market rate.

If the Canadian Dollar Became Stronger Relative to the U