Question

Quiz Instructions Question 1 4 pts Assume that the British pound is trading at a spot price of US$1.45 per pound. Further assume that the premium of an American call option with a striking price of $1.44 is 2.10 cents. What are the intrinsic value and the time value of the call option (in cents) per pound, respectively?. 1; 1.10 0; 2.10 2.10:0 0.01; 2.09 Question 2 4 pts Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €50 million which is payable in one year. The current spot exchange rate is $1.1/€ and the one-year forward rate is $1.20/€. The annual interest rate is 5.0% in the U.S. and 2.0% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure.

          Quiz Instructions
Question 1
4 pts
Assume that the British pound is trading at a spot price of US$1.45 per pound. Further assume that the premium of an American
call option with a striking price of $1.44 is 2.10 cents. What are the intrinsic value and the time value of the call option (in cents)
per pound, respectively?.
1; 1.10
0; 2.10
2.10:0
0.01; 2.09
Question 2
4 pts
Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €50 million which is payable in
one year. The current spot exchange rate is $1.1/€ and the one-year forward rate is $1.20/€. The annual interest rate is 5.0% in
the U.S. and 2.0% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to
hedge exchange exposure.

Quiz Instructions
Question 1
4 pts
Assume that the British pound is trading at a spot price of US1.45 per pound. Further assume that the premium of an American
call option with a striking price of1.44 is 2.10 cents. What are the intrinsic value and the time value of the call option (in cents)
per pound, respectively?.
1; 1.10
0; 2.10
2.10:0
0.01; 2.09
Question 2
4 pts
Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €50 million which is payable in
one year. The current spot exchange rate is 1.1/€ and the one-year forward rate is1.20/€. The annual interest rate is 5.0% in
the U.S. and 2.0% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to
hedge exchange exposure.

Added by Lisa E.

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