Suppose It Is May 1998 and the Current Spot Rate

question 22

Multiple Choice

Suppose it is May 1998 and the current spot rate for the DM is $0.5925.The call premium on a call option with an exercise price of $0.5675 is $0.0373.What is the time value of one DM 62,500 call option?

• A)$2,331.25
• B)$1,562.50
• C)$950.00
• D)$768.75

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Definitions:

Natural

Existing in or derived from nature; not made or caused by humankind.

Analogue

Something that is similar or comparable to another thing, particularly in function or features.

Natural Experiment

An empirical study in which individuals are exposed to experimental and control conditions that are determined by nature or by other factors outside the control of the investigators.

Analogue Experiment

An experimental design used to study a particular phenomenon by replicating it or simulating it in a controlled environment, especially when direct experimentation is not possible.