The Current Spot Exchange Rate Is $1 $\ddot { l } _{\$}$

Multiple Choice

The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00.Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00.Immediate exercise of this option will generate a profit of

A) $6,125.
B) $6,125/(1 + $\ddot { l } _{\$}$ ) ^3/12.
C) negative profit,so exercise would not occur.
D) $3,125.