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a) Assume the euro's spot price at the expiration date (market price) is *123/€ The investor's profit = ( X/€ b) Assume the euro's spot price at the expiration date (market price) is ¥137/€ The investor's profit = ( ¥/€ c) What is the maximum loss Maximum loss = X/€ d) What the maximum profit Maximum profit = ¥/C

a) Assume the euro's spot price at the expiration date (market price) is *123/€ The investor's profit = ( X/€ b) Assume the euro's spot price at the expiration date (market price) is ¥137/€ The investor's profit = ( ¥/€ c) What is the maximum loss Maximum loss = X/€ d) What the maximum profit Maximum profit = ¥/C

Essentials Of Investments
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
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An investor is bearish on the euro and believes it will decrease against the Japanese Yen. The investor purchases a currency put option on the euro with a strike price (exchange rate) of ¥132/€. When the investor purchases the contract, the spot rate of the euro is equivalent to 131/€. the premium is ¥3/€ a) Assume the euro's spot price at the expiration date (market price) is ¥123/€ The investor's profit=C ¥/€ b) Assume the euro's spot price at the expiration date (market price) is ¥137/€ The investor's profit=[ ¥/€ c) What is the maximum loss Maximum loss = ¥/C d) What the maximum profit Maximum profit= ¥/€
Transcribed Image Text:An investor is bearish on the euro and believes it will decrease against the Japanese Yen. The investor purchases a currency put option on the euro with a strike price (exchange rate) of ¥132/€. When the investor purchases the contract, the spot rate of the euro is equivalent to 131/€. the premium is ¥3/€ a) Assume the euro's spot price at the expiration date (market price) is ¥123/€ The investor's profit=C ¥/€ b) Assume the euro's spot price at the expiration date (market price) is ¥137/€ The investor's profit=[ ¥/€ c) What is the maximum loss Maximum loss = ¥/C d) What the maximum profit Maximum profit= ¥/€
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