The Existing Spot Rate of the Canadian Dollar Is

question 88

Multiple Choice

The existing spot rate of the Canadian dollar is $.82. The premium on a Canadian dollar call option is $.04. The exercise price is $.81. The option will be exercised on the expiration date if at all. If the spot rate on the expiration date is $.87, the profit as a percent of the initial investment (the premium paid) is:

• A) 0 percent
• B) 25 percent
• C) 50 percent
• D) 150 percent
• E) None of these are correct.

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Definitions:

Population Median

The middle value of a dataset when it is ordered from the smallest to the largest, representing the central tendency of the population.

Normal Approximation

Normal approximation is a statistical technique that applies the properties of the normal distribution to approximate the distribution of sample data or statistics.

Standardized Test Statistic

A value computed from sample data and the null hypothesis that measures how many standard deviations the sample data falls from the hypothesized value.

Alternative Hypothesis

In statistical hypothesis testing, the hypothesis that suggests there is an effect or a difference, as opposed to the null hypothesis which suggests there is no effect or difference.