​A Put Option on British Pounds Has a Strike (Exercise)

question 42

Multiple Choice

​A put option on British pounds has a strike (exercise) price of $1.48. The present exchange rate is $1.55. This put option can be referred to as:

• A) ​in the money.
• B) ​out of the money.
• C) ​at the money.
• D) ​at a discount.

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Definitions:

Price Decrease

A reduction in the cost of a good or service, which usually leads to an increase in the quantity demanded by consumers.

Allowance

An amount of money given regularly for a specific purpose, often by a parent to a child or by an employer to an employee.

Preferences

The subjective tastes and choices of consumers, which guide their decision-making in selecting among alternatives.

Laspeyres Price Index

A measure of the change in the overall price of a specific set of goods and services over time, using the quantities of the goods and services purchased in the base period.