1. A put option has an exercise price of $30 and a stock price of $25. If the put option is trading for $5.25, what is the intrinsic value of the option?
a. $1 b. $2 c. $3 d. $5
2. A call option has an exercise price of $30 and a stock price of $34. If the call option is trading for $5.25, what is the intrinsic value of the option?
a. $0.00 b. $1.25 c. $4.00 d. $5.25
3. Your firm is a U.K.-based importer of bicycles. You have bought €750,000 worth of bicycles from an Italian firm. Payment (in euros) is due in one year. Your firm wants to hedge the payable into pounds. Spot exchange rate are $2/£ and 1.55/€ The interest rates are 3% in €, 6% in $ and 4% in £, all quoted as an APR, Calculate the future value in pounds of the cost in pounds of being able to pay the supplier €750,000
a. £564,320.39 b. £586893.20 c. £728,155.34 d. None of the above