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Assume that a speculator purchases a put option on British pounds (with a strike price of $1.50) for $.05 per unit. A pound option represents 31,250 units. Assume that at the time of the purchase, the spot rate of the pound is $1.51 and continually rises to $1.62 by the expiration date. The highest net profit possible for the speculator based on the information above is:
Utility-Maximizing
The economic principle where individuals or firms make choices that lead to the highest level of satisfaction or profit.
Satisfaction
The fulfillment or gratification of a need, desire, or appetite, often used in the context of consumer experiences with goods or services.
Demand Curve
A visual depiction showing how the quantity of a product demanded by buyers varies with its price.
Horizontal Summation
A method used to determine the total market demand or supply by adding together the quantities demanded or supplied at each price by all individuals.
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