a) On the 10th of December 2020, an investor buys a call option (European) with a strike price of £30 for £3 with a maturity of three months. When will the trader exercise the option? Describe when they would lose money? b) The same investor sells a put option with a strike price of £40 for £5. What is the investor's maximum loss and maximum gain?

a) On the 10th of December 2020, an investor buys a call option (European) with a strike price of £30 for £3 with a maturity of three months. When will the trader exercise the option? Describe when they would lose money? b) The same investor sells a put option with a strike price of £40 for £5. What is the investor's maximum loss and maximum gain?

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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June 2019 Mexican peso futures contract has a price of $0.05197 per MXN. You believe the spot price in June will be 0.05831 per MXN a. What speculative position would you enter into to attempt to profit from your beliefs? O Short position O Long Position b. Calculate your anticipated profits, assuming you take a position in three contracts. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Anticipated profit c. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes? (A Negative value should be indicated with a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number)
Assume interest rate is zero. In a shout call option the strike price is $30. The holder shouts when the asset price is $40. What is the payoﬀ from the option if the ﬁnal asset price is $35? A. $0 B. $5 C. $10 D. $15
4b) A trader is asked to value a 1-year European call option for Facebook Ltd. common stock, which last traded at 43 USD. He has collected the following information: call and put option exercise price 45 USD, 1-year put option price 4 USD, 1-year Treasury bill rate 5.50% continuously compounded. Calculate the European call option value using put-call parity.
Give typing answer with explanation and conclusion 5. A European call option on Home Depot stock has a strike price of $160 and expires in 0.9 years. Home Depot stock has a current market price of $165.99 and the risk-free rate is 4%. What must be the minimum price of the option?
You sell a call option on Tesla stock with an exercise price of $150.00. The option expires after one month period as soon as the option premium is $12.00. what is the profit on this option is the stock price $180 at expiration?
An investor has purchased United States dollar call options, with an exercise price of A$1.15 anda premium of A$0.03 per unit.(a) Calculate the break-even price. (b) Calculate the profit or loss of the option for the investor if the spot rate at the time the investor considers exercising the options is : (1) A$1.10 (2) A$1.17 (3) A$1.23.(c) What is the maximum loss for the investor?(d) Explain why the investor could have an unlimited profit if the options are exercised.(e) Explain in general the similarities of and differences between a currency call option and a currency put option.
June 2021 Mexican peso futures contract has a price of $0.05197 per MXN. You believe the spot price in June will be $0.05831 per MXN. MXN500,000 is the contract size of one MXN contract. Required: What speculative position would you enter into to attempt to profit from your beliefs? Calculate your anticipated profits, assuming you take a position in three contracts. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes?
A firm has a payable of €2,400,000.00. They hedge this exposure with a call option with a strike price of $ 1.2083 / €. The premium of the option is $0.0121. If at the time of payment the spot price ends up equal to $ 1.2687 / €. What is the firm's total cost?
Today's price of Microsoft (MSFT) is $150 per share. A retail investor purchases an at-the-money European put option on MSFT with a maturity of one year. She pays a premium of $14.11. The c.c. risk-free interest rate is one percent. What is the potentiality value of the option? Round your answer to three decimal places.
June 2021 Mexican peso futures contract has a price of $0.05194 per MXN. You believe the spot price in June will be $0.04525 per MXN. Required: a. What speculative position would you enter into to attempt to profit from your beliefs? b. Calculate your anticipated profits, assuming you take a position in three contracts. c. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes? Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate your anticipated profits, assuming you take a position in three contracts. Note: Do not round intermediate calculations. Round your answer to the nearest whole number. Anticipated profit

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