1. If a put option has spot price higher than the exercise price, then the option is ___________. The buyer of the option should _________ the option.

a. in the money; exercise

b. out of the money; exercise

c. in the money; not exercise

d. out of the money; not exercise

e. at the money; exercise

2. Assume the six-month European call option has a striking price of $0.95/CHF. Assume the option premium is $0.02/CHF.

If at the due date, the value of the Swiss Franc has decreased to $0.90/CHF. The option should ______. The net profit/loss of the buyer is _______.

a. be exercised; $0.03/CHF.

b. be exercised; $0.05/CHF

c. not be exercised; $-0.02/CHF

d. not be exercised; $0.03/CHF