Frank is an option speculator. He anticipates the Danish kroner to appreciate from its current level of $.19 to $.21. Currently, kroner call options are available with an exercise price of $.18 and a premium of $.02. Should Frank attempt to buy this option? If the future spot rate of the Danish kroner is indeed $.21, what is his profit or loss per unit?
A) no; -$0.01.
B) yes; $0.01.
C) yes; -$0.01.
D) yes; $0.03.
Correct Answer:
Verified
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