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15. The existing spot rate of the Canadian dollar is s.82. The premium on a Canadian dolar call option 1s $$.04. The exercise price is $.81. The option will be exercised on the expiration date if at all. If the spot rate on the expiration date is $.87, the profit as a percent of the initial investment (the premium paid) is:

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Answer #1

Please find below the solution...

Buy premium price = 0.04
At expiry sale premium price = 0.06
=0.87-0.81
Profit = 0.06-.04 0.02
Profit as % of initial investment = 0.02/.04 50%
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