What Is the Intrinsic Value of a Foreign Currency Option

question 6

Multiple Choice

What is the intrinsic value of a foreign currency option?

• A)the difference between the spot rate and the strike price
• B)the gain on the option if it was exercised immediately
• C)the chance that a currency will rise over time to make the option in the money
• D)the difference between a call option and a put option

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Definitions:

Contract of Purchase

A legally binding agreement between parties for the sale and purchase of goods, services, or property.

Specific Goods

Items that are identified and agreed upon at the time a contract of sale is made, distinct from generic or interchangeable goods.

Point of Delivery

The specific location or moment when the transfer of goods or services from a seller to a buyer is considered complete.

Competition Act

Legislation aimed at preventing anti-competitive practices in the marketplace, protecting consumers and ensuring fair trade.