Assume That the German Mark Spot Rate Is $0

question 11

Multiple Choice

Assume that the German mark spot rate is $0.5891 and the six-month forward rate is $0.5971. Also, assume that the six-month Eurodollar rate is 6%.
-When the current spot exchange rate exceeds the exercise price which of the following combinations of statements is true?
(i) A call option is in the money.
(ii) A call option is out of the money.
(iii) A put option is in the money.
(iv) A put option is out of the money.

• A) (i) and (ii)
• B) (i) and (iii)
• C) (i) and (iv)
• D) (ii) and (iv)

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Definitions:

Index Finger

The second digit of the human hand, located between the thumb and the middle finger, often used for pointing.

Sternocleidomastoid

A muscle located in the neck that is responsible for turning the head side to side and nodding.

Sternal Manubrium

The triangular upper portion of the sternum that articulates with the clavicles and the first two pairs of ribs.

Mastoid Process

A protruding bony area located behind the ear on the skull that contains air cells and serves as an attachment site for neck muscles.