If the spot exchange rate is greater than the exercise exchange rate, then:
A) the holder of a call option will exercise
B) the holder of a call option will not exercise
C) the writer of the option will buy the currency
D) both the holder of a call option will exercise and the writer of the option will buy the currency

Question

Quizplus · Accepted Answer

The holder of a call option will exercise the option when the spot exchange rate is greater than the exercise exchange rate, as it allows them to buy the currency at a lower price than the current market rate.

If the Spot Exchange Rate Is Greater Than the Exercise