The premium on a call option is primarily a function of the difference in spot price S

relative to the strike price X

$,$ the length of time until expiration T

$,$ and the volatility of the currency $\backslash$sigma

$.$

C$=$f$($S $-$ X$,$ T$,\backslash$sigma $)$

For each characteristic of a call option, use the table to indicate whether that would lead to a higher call option premium or a low call option premium $($all else equal$).$

Characteristic

Higher Call Option Premium

Lower Call Option Premium

A lower spot price relative to the strike price

A shorter time before expiration

A lower level of volatility for the currency

When using a call option to hedge payables in an international currency, a U$.$S$.$ based MNC can lock in the amount of dollars needed to obtain the needed foreign currency.