Question: Forward exchange rate ( one Yr ) : 1. 54 5 / BP Information for Money Market Instruments ( MM I ) : Current exchange

Forward exchange rate ( one Yr ) : 1. 54 5 / BP Information for Money Market Instruments ( MM I ) : Current exchange rate : 1. 50 5 / BP Investment return at Aerion Fund Management ( in UK ) : 4% annual Interest rate of borrowing from Bank of America ( in USA ) : 2% annual Information you need for Currency Options Contract : Options premium : 0. 015 $ / BP Interest rate of borrowing from Bank of America ( USA ) : 2% annual Allowed to exercise options at 1. 54 5 / BP Let's suppose you signed the Currency Options Contract . The actual exchange rate at the time of the payment is 1. 50 $ / BP. What would you do ?" C Exercise the option and take 1.54 5 / BP. O Do not exercise the option and take the actual exchange rate of 1. 50 $ / BP

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