Final answer:
To determine the total cost for the options position, the number of contracts is multiplied by the premium and the contract size. Two Swiss franc call options at a premium of 2.5, with a contract size of 10,000, result in a total cost of 500.
Step-by-step explanation:
The question asks about the calculation of the total cost for purchasing options contracts. An investor purchases 2 December 81.50 Swiss franc call options at a premium of 2.5, with each contract representing 10,000 francs. To calculate the total cost paid by the investor for the position, we multiply the number of contracts by the premium and then by the contract size.
The calculation is as follows: Total Cost = Number of contracts × Premium per contract × Contract size.
So, the total cost is: Total Cost = 2 × 2.5 × 10,000 = 50,000. As a result, the correct answer is C) 500, assuming that the premium price is represented in hundredths (as is typical with options). This is a common scenario within the scope of financial markets and options trading.