a. What are currency options? What are the ways in which firms use currency call options? If you were a speculator how would you use a call option?
b. Country risk is a critical consideration in direct foreign investments. What does country risk analysis involve?
c. A call option on US dollar is available with a strike price of GHS 4.400. Sumaila, a speculator, purchased the option for a premium of 0.2500 per USD. The USD spot rate on the day of expiration is 4.500.
a. Is the call option in the money? Explain.
b. How much profit/loss per unit did Sumaila make on this call option?
c. What is the net profit per unit to the seller of this call option?