Question: The current spot exchange rate is $1.54 = 1.00 and the three-month forward rate is $1.60 = 1.00. Consider a three-month American call option on

The current spot exchange rate is $1.54 = 1.00 and the three-month forward rate is $1.60 = 1.00. Consider a three-month American call option on 62,500 with a strike price of $1.50 = 1.00. Immediate exercise of this option will generate a profit of

A) $6,125.

B) $6,125/(1 +i_$)^3/12.

C) negative profit, so exercise would not occur.

D) $2,500.

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