Suppose It Is January 1990 and the Current Spot Rate

question 17

Multiple Choice

Suppose it is January 1990 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 intrinsic 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:

Basicity

A measure of the ability of a substance to accept hydrogen ions (protons), often used to describe the strength of bases.

Formic Acid

The simplest carboxylic acid, with the formula HCOOH, used industrially and as an antiseptic.

Ka

An equilibrium constant for the dissociation of a weak acid into its proton and conjugate base in solution; a measure of acid strength.

pKa

A measure of the acidity of a hydrogen atom in a molecule, indicating the tendency of the molecule to donate a proton.