11. Calandra Panagakos at CIBC. Calandra Panagakos works for CIBC Currency Funds in Toronto. Calandra is something of a contrarian-as opposed to most of the forecasts, she believes the Canadian dollar (C$) will appreciate versus the U.S. dollar over the coming 90 days. The current spot rate is $0.6750/C$. Calandra may choose between the following options on the Canadian dollar. Option Put on C$ Call on C$ Strike Price $0.7000 $0.7000 Premium $0.00003/S$ $0.00049/S$ a. Should Calandra buy a put on Canadian dollars or a call on Canadian dollars? b. What is Calandra's break-even price on the option purchased in part (a)? c. Using your answer from part (a), what is Calandra's gross profit and net profit (including premium) if the spot rate at the end of 90 days is indeed $0.7600? d. Using your answer from part (a), what is Calandra's gross profit and net profit (including premium) if the spot rate at the end of 90 days is $0.8250?
11. Calandra Panagakos at CIBC. Calandra Panagakos works for CIBC Currency Funds in Toronto. Calandra is something of a contrarian-as opposed to most of the forecasts, she believes the Canadian dollar (C$) will appreciate versus the U.S. dollar over the coming 90 days. The current spot rate is $0.6750/C$. Calandra may choose between the following options on the Canadian dollar. Option Put on C$ Call on C$ Strike Price $0.7000 $0.7000 Premium $0.00003/S$ $0.00049/S$ a. Should Calandra buy a put on Canadian dollars or a call on Canadian dollars? b. What is Calandra's break-even price on the option purchased in part (a)? c. Using your answer from part (a), what is Calandra's gross profit and net profit (including premium) if the spot rate at the end of 90 days is indeed $0.7600? d. Using your answer from part (a), what is Calandra's gross profit and net profit (including premium) if the spot rate at the end of 90 days is $0.8250?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Calandra Panagakos works for CIBC Currency Funds in Toronto. Calandra is something of a contrarian—as opposed to most of the forecasts , she believes the Canadian dollar (C$) will appreciate versus the U.S. dollar over the coming 90 days. The current spot rate is $0.6750/C$. Calandra may choose between the following options on the Canadian dollar.
Option Strike Price Premium
Put on C$ $0.7000 $0.00003/S$
Call on C$ $0.7000 $0.00049/S$
Should Calandra buy a put on Canadian dollars or a call on Canadian dollars?
What is Calandra’s break-even price on the option purchased in part (a)?
Using your answer from part (a), what is Calandra’s gross profit and net profit (including premium) if the spot rate at the end of 90 days is indeed $0.7600?
Using your answer from part (a), what is Calandra’s gross profit and net profit (including premium) if the spot rate at the end of 90 days is $0.8250?
Transcribed Image Text:11. Calandra Panagakos at CIBC. Calandra Panagakos works for CIBC Currency Funds in Toronto. Calandra is something of a
contrarian as opposed to most of the forecasts, she believes the Canadian dollar (C$) will appreciate versus the U.S. dollar over
the coming 90 days. The current spot rate is $0.6750/C$. Calandra may choose between the following options on the Canadian
dollar.
Option
Put on C$
Call on C$
Strike Price
$0.7000
$0.7000
Premium
$0.00003/S$
$0.00049/S$
a. Should Calandra buy a put on Canadian dollars or a call on Canadian dollars?
b. What is Calandra's break-even price on the option purchased in part (a)?
c. Using your answer from part (a), what is Calandra's gross profit and net profit (including premium) if the spot rate at the end
of 90 days is indeed $0.7600?
d. Using your answer from part (a), what is Calandra's gross profit and net profit (including premium) if the spot rate at the end
of 90 days is $0.8250?
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