The current spot exchange rate is $1.250 = 1.00 and the three-month forward rate is $1.280 = 1.00. Consider a three-month American call option with a strike price of $1.200 = 1.00. A call option contract specifies $125,000. If you pay an option premium of $3,125 to buy a contract of this call, at what exchange rate will you break-even?

$1.175 per euro

1.225 per euro

$1.255 per euro

$1.275 per euro

Consider a call option contract. The option is a three-month American call option with a strike price of $1.250 = 1.00 and an option premium of $3,125. A call option contract specifies 62,500.

(1) What is the call premium per unit (i.e., per pound)?

(2) What is the break-even exchange rate?

(1) $.025 per unit,(2)$1.225 per unit

(1)$.025per unit,(2)$1.275per unit

(1)$.050per unit,(2)$1.200per unit

(1)$.050per unit,(2)$1.300per unit