Complete all three parts of this questionwhy does a lower, Ask an Expert

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Complete all three parts of this question.

Why does a lower exercise price mean a call option will have a higher premium and a put option a lower premium?

Suppose you buy a put option on a $1 million Canada bond futures contract with an exercise price of 100 and the price of the Canada bond is 110 at expiration.

(i) Is the contract in the money, out of the money, or at the money?

(ii) What is your profit or loss on the contract if the premium was $50,000?

Suppose you buy a call option on a $1 million Canada bond futures contract with an exercise price of 150 for a premium of $20,000. If on expiration the futures contract has a price of 155, what is your profit or loss on the contract?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92433993

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