Question
A put option on British Pounds with an exercise price of $2.00 is purchased by a...
A put option on British Pounds with an exercise price of $2.00 is purchased by a speculator for a premium of $0.05. If the British Pound's spot rate is $2.10 on the expiration date, should the speculator exercise the option on this date or let the option expire? What is the net profit per unit to the speculator? What is the net profit per unit to the seller of this put option? Please show formulas
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