A Call Option on Euros Is Written with a Strike

question 67

Multiple Choice

A call option on euros is written with a strike price of $1.30/euro. Which spot price maximizes your profit if you choose to exercise the option before maturity?

• A) $1.20/euro
• B) $1.25/euro
• C) $1.30/euro
• D) $1.35/euro

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Definitions:

Consolidation Entries

Journal entries made in the process of preparing consolidated financial statements to eliminate intercompany transactions and balances among the entities of a consolidated group.

Consolidated Financial Statements

Financial statements that present the assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries as one single entity.

Fair Values

A valuation reflecting what an asset or liability might fetch in the marketplace, determined by the price it could be sold for or the cost to transfer the liability, during a well-organized exchange among participants on the date of valuation.

Consolidated Balance Sheet

A financial statement that presents the assets, liabilities, and equity of a parent company and its subsidiaries as one single entity.