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: 

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? 

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

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

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

Answer rating: 100% (QA)

SOLUTION To determine whether the put option is in at or outofthemoney we need to compare the exerci... View the full answer