If the spot rate ____ the exercise price, a currency ____ option will not be exercised.
A)remains below; call
B)remains below; put
C)remains above; call
D)remains below; call AND remains below; put

Question

Quizplus · Accepted Answer

A call option gives the holder the right to buy at the exercise price. If the spot rate remains below the exercise price, it is cheaper to buy in the market, so the call option will not be exercised.

If the Spot Rate ____ the Exercise Price, a Currency