The following represents premiums on dollar options on the UK pound:

a What is meant by a call option and a put option? For both calls and puts devise simple scenarios whereby it would be advantageous for an MNC to buy a call or a put option.
b Explain why the March premiums are larger than the January premiums.
c Explain why for calls the higher the strike the lower the premium and vice versa for puts.

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Premiums ($) Strike $ Call January Call March Put January Put March 1.1 0.130 0.150 0.001 0.010 1.2 0.040 0.060 0.010 0.012 1.3 0.005 0.010 0.066 0.069