If the Spot Rate ____ the Exercise Price, a Currency

question 30

Multiple Choice

If the spot rate ____ the exercise price, a currency ____ option will not be exercised.

• A)remains below; call
• B)remains below; put
• C)remains above; call
• D)remains below; call AND remains below; put

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Definitions:

Two-Tailed Test

A hypothesis testing approach that allows for the possibility of an effect in two directions, either higher or lower than the null hypothesis, and hence tests for the presence of any significant difference.

Test Statistic

A calculated value that is used in statistical tests to determine whether to reject the null hypothesis, based on sample data.

P-Value

The probability of getting the observed value of the test statistic, or one more extreme, assuming the null hypothesis is true.

Level Of Significance

The probability of rejecting the null hypothesis when it is true, typically set as a threshold like 0.05 or 0.01 before conducting a hypothesis test.