Answer: $36,400
Explanation:
Given the following;
Premium price = $0.02
Exercise price = $0.5
Amount(pound payable) payable = $70,000
Therefore, total amount will be the sum of the actual amount when the option is being exercised and the amount paid as premium.
Therefore,
Amount paid on exercised option = dollar payable × exercise price
Amount paid on exercise option = 70000 × 0.5 = $35,000
Amount paid as premium = dollar payable × premium price
Amount paid as premium = 70000 ×0.02 = $1,400
Therefore total amount paid = $35,000 + $1,400 = $36,400
