25) Jack Hemmings bought a 3-month British pound futures contract for $1.4400/ only to see the dollar appreciate to a value of $1.4250 at which time he sold the pound futures. If each pound futures contract is for an amount of 62,500, how much money did Jack gain or lose from his speculation with pound futures? A) $937.50 gain B) 937.50 gain C) 937.50 loss D) $937.50 loss 26) A foreign currency ________ option gives the holder the right to ________ a foreign currency whereas a foreign currency ________ option gives the holder the right to ________ an option. A) call, sell, put, buy B) put, hold, call, release C) call, buy, put, sell D) none of the above 27) An option whose exercise price is equal to the spot rate is said to be ________. A) in-the-money B) at-the-money C) on-the-spot D) out-of-the-money 28) A call option whose exercise price exceeds the spot price is said to be ________. A) over-the-spot B) in-the-money C) out-of-the-money D) at-the-money TABLE 8.1 Use the below mentioned table to answer following question(s). April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts). 29) Refer to Table 8.1. What was the closing price of the British pound on April 18, 2009? A) 1.448/$ B) $14.48/ C) $1.448/ D) None of the above 30) Refer to Table 8.1. The exercise price of ________ giving the purchaser the right to sell pounds in June has a cost per pound of ________ for a total price of ________. A) 1450; 1.02 cents; $637.50. B) 1440; 1.42 cents; $887.50. C) 1460; 0.68 cents; $425.00. D) 1440; 1.06 cents; $662.50. 31) Dash Brevenshure works for the currency trading unit of ING Bank in London. He speculates that in the coming months the dollar will rise sharply vs. the pound. What should Dash do to act on his speculation? A) Sell a put on the pound. B) Buy a put on the pound. C) Sell a call on the pound. D) Buy a call on the pound. 32) A put option on yen is written with a strike price of 105.00/$. Which spot price maximizes your profit if you choose to exercise the option before maturity? A) 115/$ B) 100/$ C) 110/$ D) 105/$ 33) A call option on euros is written with a strike price of $1.30/euro. Which spot price maximizes your profit if you choose to exercise the option before maturity? A) $1.35/euro B) $1.25/euro C) $1.30/euro D) $1.20/euro 34) A call option on UK pounds has a strike price of $2.05/ and a cost of $0.02. What is the break-even price for the option? A) $2.05/ B) $2.03/ C) $2.07/ D) The answer depends upon if this is a long or a short call option. 35) Your U.S firm has an accounts payable denominated in UK pounds due in 6 months. To protect yourself against unexpected changes in the dollar/pound exchange rate you should A) buy a pound put option. B) sell a pound call option. C) sell a pound put option. D) buy a pound call option. 36) Fred Schwed is a currency speculator who enjoys "betting" on changes in the foreign currency exchange market. Currently the spot price for the Japanese yen is 129.87/$ and the 6-month forward rate is 128.53/$. Fred thinks the yen will move to 128.00/$ in the next six months. If Fred buys $100,000 worth of yen at today's spot price and sells within the next six months at 128/$ he will earn a profit of ________. A) $101,460.94 B) $146.09 C) $1460.94 D) nothing; he will lose money 37) ________ volatility are calculated by being backed out of the market option premium values traded. A) Forward-looking B) Implied C) Historic D) none of the above