Suppose you took a long position on a put option with an exercise price of $1.45 per pound and paid a premium of $0.10 per pound.

Required:

a. If the spot exchange rate turns out to be $1.60 per pound on the maturity date, is the put option in-, at-, or out-of-the-money?

b. If the spot exchange rate turns out to be $1.60 per pound on the maturity date, will you exercise this option?

c. If the spot rate at maturity turns out to be $1.40 per pound, is the contract in-, at-, or out-of-the-money?

d. If the spot rate at maturity turns out to be $1.40 per pound, will you exercise this option?