Speculators May Be Willing to Write ____ Options on Foreign

question 15

Multiple Choice

Speculators may be willing to write ____ options on foreign currencies they expect to ____ against the dollar.

• A) put; strengthen
• B) put; weaken
• C) call; strengthen
• D) call; weaken
• E) A and D

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Definitions:

Implicit Interest

The interest rate that is not explicitly stated but inferred from the difference between the purchase price and the total payments to be made in a financing transaction.

Zero-Coupon Bond

A type of bond that does not pay periodic interest and is sold at a discount from its face value, with the full face value being paid at maturity.

Implicit Interest

The interest represented by the difference between the cash price of a product and the amount financed over time, not directly stated as an interest rate.

Face Value

The nominal or dollar value of a security stated by the issuer, which is the amount paid back to the holder at maturity.