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The current spot exchange rate is $1.40 = 1.00 and the three-month forward rate is $1.45 = 1.00. Consider a three-month American call option on
The current spot exchange rate is $1.40 = 1.00 and the three-month forward rate is $1.45 = 1.00. Consider a three-month American call option on 62,500 with a strike price of $1.34 = 1.00. Immediate exercise of this option will generate a profit of
A. $3,750
B. $3,950
C. negative profit, so exercise would not occur
D. $4,125
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