23-88 If the Manager Buys a One-Year Option with an Exercise

question 89

Multiple Choice

23-88 If the manager buys a one-year option with an exercise price equal to the expected price of the bond in one year,what will be the exercise price of the option?

• A)$84.00.
• B)$85.99.
• C)$86.21.
• D)$85.74.
• E)$85.96.

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Definitions:

Foreign Currency Futures

A standardized contract to buy or sell a specific currency at a specified price on a future date, used for hedging or speculation on currency movements.

Australian Dollar

The currency of Australia, often represented by the symbol AUD in financial transactions.

S&P 500 Index

A U.S. stock market index that measures the stock performance of 500 prominent companies listed on the NYSE or NASDAQ, using their market caps.