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The existing spot rate of the Canadian dollar is $0.82/C$. The premium on a Canadian dollar...

The existing spot rate of the Canadian dollar is $0.82/C$. The premium on a Canadian dollar call option is $0.04. The exercise price is $0.81/C$. The option will be exercised on the expiration date if at all. If the spot rate on the expiration date is $0.80, the profit (if any) as a percent of the initial investment (the premium paid) is:

a. 0% b. 100% c. - 100% d. 50%

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Answer #1

As expiry price is less than strike price call will not be exercised and the premium will be lost

Hence, Profit %=-100%

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