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You purchased a European foreign exchange option contract to buy 8000 UK pound at the price of $1.36/ which expires today. You have paid the
You purchased a European foreign exchange option contract to buy 8000 UK pound at the price of $1.36/ which expires today. You have paid the option premium of $260 for the contract. Suppose the spot rate on the expiration date, today, is $1.38/,
a) What will be your optimal decision for the contract (exercise or not exercise)?
b) Do you enjoy gain or suffer loss?
c) How much of the gain or loss in US$?
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