Final answer:
The speculative premium on the call option for wheat is $2 per bushel, calculated by subtracting the intrinsic value ($5) from the option's price ($7).
Step-by-step explanation:
The student asks about calculating the speculative premium on a call option for wheat with a strike price of $20 per bushel, when wheat is currently selling at $25 per bushel, and the option itself costs $7 per bushel. The speculative premium is the amount by which the price of an option exceeds its intrinsic value. In this case, the intrinsic value of the call option is the current market price ($25) minus the strike price ($20), which is $5. Therefore, the speculative premium is the cost of the option ($7) minus the intrinsic value ($5), which equates to $2 per bushel.