2.1 Suppose you long one Australian dollar call and one Australi an dollar put with an exercise exch ange rate of 0.75 (USD/AUD). The price of call and the price of put is US D0.06. Using the 10 period (spot) exch ange rates below: Time Spot Exchange Rate (USD/AU D) 0.35 1 0.40 2 0.45 3 0.50 4 0.55 0.60 6 0.65 7 0.70 8 0.75 9 0.80 10 0.85 11 0.90 12 0.95 13 1.00 1.05 14 15 1.10 (a) Compute the net call payoff, net put payoff and net combined payoff. (b) Plot separately the Net Long call payoff, the net long put payoff and the net combined payoff. (c) Name and provide definition of the shape of the combined payoff obtained from part (b)?
2.1 Suppose you long one Australian dollar call and one Australi an dollar put with an exercise exch ange rate of 0.75 (USD/AUD). The price of call and the price of put is US D0.06. Using the 10 period (spot) exch ange rates below: Time Spot Exchange Rate (USD/AU D) 0.35 1 0.40 2 0.45 3 0.50 4 0.55 0.60 6 0.65 7 0.70 8 0.75 9 0.80 10 0.85 11 0.90 12 0.95 13 1.00 1.05 14 15 1.10 (a) Compute the net call payoff, net put payoff and net combined payoff. (b) Plot separately the Net Long call payoff, the net long put payoff and the net combined payoff. (c) Name and provide definition of the shape of the combined payoff obtained from part (b)?
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
Suppose you long one Australian dollar call and one Australian dollar
put with an exercise exchange rate of 0.75 (USD/AUD) and 0.65 (USD/AUD)
respectively. The price of call and the price of put is USD0.04 and USD0.08,
respectively..
(a) Compute the net call payo, net put payo and net combined payo.
(b) Plot separately the Net Long call payo, the net long put payo and the
net combined payo.
(c) Name and provide de nition of the shape of the combined payo obtained
from part (b)?
Transcribed Image Text:2.1 Suppose you long one Australian dollar call and one Australian dollar put
with an exercise exchange rate of 0.75 (USD/AU D). The price of call and the
price of put is US DO.06. Using the 10 period (spot) exchange rates below:
Time
Sp ot Exchange Rate (USD/AU D)
0.35
1
0.40
0.45
3
0.50
4
0.55
5
0.60
0.65
7
0.70
8
0.75
9
0.80
10
0.85
11
0.90
12
0.95
13
1.00
14
1.05
15
1.10
(a) Compute the net call payoff, net put payoff and net combined payoff.
(b) Plot separately the Net Long call payoff, the net long put payoff and the
net combined payoff.
(c) Name and provide definition of the shape of the combined payoff obtained
from part (b)?
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