This workout tells us we use a Black-Scholes calculator to price a GBP USD 1.22 put option, and it gives us a raw price of 0.0092 US dollars per pound. The spot rate is 1.25. The first question is, what is the price expressed in US dollar pips and percentage GBP? So here we have the spot of 1.25 and the raw price of 0.0092 to calculate the price in US dollar pips no conversion is necessary because the raw price is quoted in terms of US dollars. So all we need to do is take that raw price and quote it in terms of pips. Now we know that 1 pip is 1 10000th or 0.0001. So if one pip is 0.0001 and we have 0.0092, we can see that we have 92 pips. To get that mathematically, all we need to do is take the raw price and multiply by 10,000.

Next, to calculate the price in percentage of the base currency, which in this case is pounds, all we need to do is take the raw price and divide that by the spot rate and display that as a percentage. So in this case, 0.736%. The next part of this workout asks that if we do the trade in 25 million pounds, what the cash premium would be in both dollars and pounds. We have our notional of 25 million pounds. To work out the dollar cash price, all we need to do is take the raw price because that's already in dollars. So the raw price is $0.0092 per pound, notional and multiply by the pound notional. And that gives us a US dollar price of 230,000. To get the cash price in pounds, we could take the US Dollar price and convert it. But the benefit of us already having done the percentage of base currency quotation is that we can simply take that 0.736% and multiply it by the notional, and that answer is already in pounds. So 184,000 pounds.