A put option is available for Swiss franc with an exercise price of AUD0.7754 and a premium of AUD0.0440. Assume that there are no brokerage fees. The future spot rate at which the _____________ of the option breaks even is AUD____________ . a. both buyer and seller; AUD 0.7314 b. seller; AUD 0.7314 c. buyer; AUD 0.8194 d. both buyer and seller; AUD 0.8194 e. buyer; AUD 0.7314

A put option is available for Swiss franc with an exercise price of AUD0.7754 and a premium of AUD0.0440. Assume that there are no brokerage fees. The future spot rate at which the _ of the option breaks even is AUD . a. both buyer and seller; AUD 0.7314 b. seller; AUD 0.7314 c. buyer; AUD 0.8194 d. both buyer and seller; AUD 0.8194 e. buyer; AUD 0.7314

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

A put option is available for Swiss franc with an exercise price of AUD0.7754 and a premium of AUD0.0440. Assume that there are no brokerage fees.

The future spot rate at which the _____________ of the option breaks even is AUD____________ .

both buyer and seller; AUD 0.7314

seller; AUD 0.7314

buyer; AUD 0.8194

both buyer and seller; AUD 0.8194

buyer; AUD 0.7314

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2. Calculate the put premium according to put-call parity which gives no arbitrage opportunity. Explain what transaction would you do if the put premium is below/above the put premium you calculated. European call option premium: c = $2 Stock price today: So- $30 Life of option: T=0.5 Risk-free rate for maturity T with continous compounding: r= 8% Strike price: K= Decide on the K value yourself (carefully). No dividends paid during life of option.
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.
Which of the following statements about European option contracts is TRUE? a. Typically American options are cheaper than otherwise similar European options due to the uncertainty regarding the date of exercise. b. One can synthesise a long forward position in the underlying by being long a call and short a put c. A long call position and a short put position both involve buying the underlying and so are equivalent d. The price of an option can be obtained by computing the true probabilities of each state of nature, working out the expected option payoff across those states and then discounting back to the present.
Choose all expressions that accurately complete the statement below: Writing a European call option on £10,000 at a strike price of $1.80/£ and a premium of $0.02/£: Group of answer choices Obligates the optionholder to purchase £10,000 for $18,000 USD. Will be profitable for the seller when the price of the GBP exceeds the put-call parity rate. Obligates the writer to sell £10,000 on the expiration date if the optionholder chooses to exercise. Allows the optionholder to exercise the option at any point up to the expiration date. Earns the seller a premium of $200.
For a call option of CN¥100,000 with the $0.16 exercise price and $0.0005 premium, When the spot exchange rate is $0.1602, the call option holder should __ the call? a. exercise b. not exercise
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?
A European call option can be exercised a. any time in the future b. only on the expiration date c. if the price of the underlying asset declines below the exerciase price d. immediately after dividends are paid e. none of these.
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For two call options on the same underlying asset and same time to maturity, the relationship c(K1) – c(K2) ≤ K2 – K₁, for K1 < K2 must hold. Otherwise, there is an arbitrage opportunity. Given the following option prices: Strike Premium 645.00 63.20 650.00 99.00 655.00 57.50 89.85 660.00 Among the four calls, there is one pair for which the above relationship is not hold and thus, one can make arbitrage. To do so, one should buy option with strike price type your answer... , and sell option with strike price type your answer... The minimum profit is type your answer... and the maximum profit is type your answer...
A financial institution has the following portfolio of over-the-counter options on GBP (sterling, UK currency): Type Position Delta of Option Gamma of Option Vega of Option Call -1,000 0.5 2.2 1.8 Call -500 0.8 0.6 0.2 Put -2,000 Call -500 -0.40 0.70 1.3 0.7 1.8 1.4 A traded option is available with a delta of 0.3, a gamma of 1.7, and a vega of 0.8. To make the portfolio both gamma-neutral and delta-neutral, you will take a (long/short) position in the traded option. You will also take a (long/short) position in GBP. How many GBP (i.e. don't worry about L/S, just write how many GBP)? Assume that all implied volatilities change by the same amount so that vegas can be aggregated. Enter your answer rounded to the nearest integer, skip the currency sign. For example, if your calculation results in GBP 9,876.1234567, you only need to enter 9876
Please show the steps and calculations

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