Complete each of the following statements, a) through c).

1. A US professional soccer team may receive 2.5 million euros in three months if the team wins a game to be held in Spain. To lock in the value of the prize money in US dollar, the team should consider buying (call/put) options.

Answer:

2. Consider an investor who purchased a call option contract on Chinese yuan (CNY). Recently a political event has significantly increased the uncertainty in the CNY currency market although whether CNY will appreciate or depreciate against other currencies is ambiguous. Such an event should (increase/decrease) the call option premium.

Answer:

3. A company expects to pay its UK contractor 10 million pounds (GBP). If the maximum dollar amount it wants to fix for the payable is $13 million, the firm should consider a (call/put) option with an exercise price of ($ ).