Question

"Calandra Panagakos works for CIBC Currency Funds in Toronto. Calandra is something of a contrarianlong dashas opposed to most of the​ forecasts, she believes the Canadian dollar​ (C$) will appreciate versus the U.S. dollar over the coming 90 days. The current spot rate is ​$0.6751​/C$. Calandra may choose between the following options on the Canadin dollar:Option Strike Price PremiumPut on C$ $0.7000 $0.00003/S$Call on C$ $0.7000 $0.00049/S$Should Calandra buy a put on Canadian dollars or a call on Canadian dollars?

Answer 1

Answer:

Calandra should buy call on Canadian Dollars on C$ $0.7000 $0.00049

Explanation:

If she is expecting the Canadian dollar to appreciate versus the United States Dollar in the future, she would buy a calla that gives her the right to buy Canadian Dollars at a lower price than hers future cost projection.