Consider the following example of a company which plans to buy aluminium. It enters into a call

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Consider the following example of a company which plans to buy aluminium. It enters into a call option contract, paying an appropriate premium for the right to buy aluminium at $1,500/tonne in three months’ time. If, at the end of the period, the spot price is

$1,400/tonne, should the company exercise its option or let it lapse?

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