Question
19. Speculating with Currency Call Options. LSU Corp. purchased Canadian dollar CALL options for speculative purposes. If these options are exercised, LSU will immediately sell
19. Speculating with Currency Call Options. LSU Corp. purchased Canadian dollar CALL options for speculative purposes. If these options are exercised, LSU will immediately sell the Canadian dollars in the spot market. Each option was purchased for a premium of $.03 per unit, with an exercise price of $.75. LSU plans to wait until the expiration date before deciding whether to exercise the options. Of course, LSU will exercise the options at that time only if it is feasible to do so. If the spot rate for Canadian dollar at the expiration date is 0.76, what is the net profit (or loss) to LSU Corp. (remember to include the premium paid in your calculation)? In your answer, do not put the dollar sign ($)
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