Alex is a currency speculator working for CIBC Currency funds in Toronto. He focuses nearlyall of his time and attention on the U.S. dollar /Canadian dollar ($/C$) exchange rate. Thecurrent spot rate is $1.3546/C$. He believes that the Canadian dollar (C$) will appreciate versusthe U.S. dollar over the coming 90 days. He can choose between the following options onCanadian dollar:OptionPut on C$Call on C$Strike price$1.400/C$$1.415/C$Premium$0.00045/C$$0.00048/C$(a) Should Alex buy a put option on Canadian dollars or a call option on Canadian dollars?(b) What is Alex's break-even price on the option purchased in part (a)(c) Using your answer for part (a) what is Alex's profit/loss if the spot rate at the end of 90 daysis $1.430/C$.d) Using your answer for part (a) what is Alex's profit/loss if the spot rate at the end of 90 daysis $1.400/C$

When a currency appreciates against the dollar, more dollars will be required to buy 1 unit of the…

Answered: (a) Should Alex buy a put option on…

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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1. Put and Call options 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 speculator has purchased United States dollar put options, with an exercise price of A$1.30and a premium of A$0.05 per unit.(a) Calculate the break-even price.(b) Calculate the profit or loss of the option for the speculator if the spot rate at the time the speculator considers exercising the options is : (1) A$1.20 (2) A$1.28 (3) A$1.34.(c) What is the maximum profit and maximum loss for the speculator?
Andrea is an option speculator. She anticipates the Canadian dollar to depreciate from its current level of 0.90 USD/CAD to 0.85 USD/CAD. Currently, Canadian dollar call options are available with an exercise price of 0.91 USD/CAD and a premium of $0.02. Also, Canadian dollar put options are available with an exercise price of 0.88 USD/CAD and a premium of $0.02. If the future spot rate of the Canadian dollar is 0.85 USD/CAD, what is Andrea's net profit or loss per unit?
I need answer typing clear urjent no chatgpt used i will give upvotes all answers pls
John Love sold a put option on Canadian dellari for S0.02 per unit The strike price was S063 and the spot rate at the tmie the option wai esercised was S0 68 Assome Jotn immediately sold the Canadian dollarn receved wben the option was exercised Alio assome that there are 203.394 unats ina Canadian dellar option. What wai Joba's net profit or los on the pot option? (dft in a losA put a negative aign in front of your answer. Roond your answer to tro decimal places)
If put options on USD with a strike price of AUD6.9/USD have a premium of AUD4.3, what is the break- even price (BEP) for a buyer or a seller of these options? Assume that there are no brokerage fees. Question Answer a. The buyer's BEP is AUD 2.6000 and the seller's BEP is AUD 11.2000 b. The buyer's BEP is AUD 2.6000 and the seller's BEP is AUD 2.6000 c. The buyer's BEP is AUD 11.2000 and the seller's BEP is AUD 11.2000 d. The buyer's BEP is AUD 11.2000 and the seller's BEP is AUD 2.6000 e. The buyer's BEP is AUD 6.9000 and the seller's BEP is AUD 11.2000
(Call Option P/L)Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $1.44/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from: Option choices on the Singapore dollar: Strike price (US$/Singapore dollar) Premium (US$/Singapore dollar) Call on S$ $1.36 $0.066 Put on S$ $1.37 $0.006 Samuel decides to buy call options in Singapore dollars. What is Samuel's (net) profit/loss (in dollars) per option if the spot rate is $1.37/S$ at maturity? Keep the sign and all decimal places. Do not include currency sign in your answer.
23. Assume that a speculator purchases a put option on British pounds (with a strike price of $1.50) for $.05 per unit. A pound option represents 31,250 units. Assume that at the time of the purchase, the spot rate of the pound is $1.51 and continually rises to $1.62 by the expiration date. The highest net profit possible for the speculator based on the information above is: A) $1,562.50. B) -$1,562.50. C) -$1,250.00. D) -$625.00.
Assume that Smith Corp. will need to purchase 200,000 British pounds in 90 days. A call option exists on British pounds with an exercise price of $1.68, a 90-day expiration date, and a premium of $.03. A put option exists on British pounds with an exercise price of $1.69, a 90-day expiration date, and a premium of $.03. Smith Corporation plans to purchase options to cover its future payables. It will exercise the option in 90 days (if at all). It expects the spot rate of the pound to be $1.76 in 90 days. Determine the amount of dollars it will pay for the payables, including the amount paid for the option premium. Group of answer choices $338,000 $342,000 $332,000 $344,000
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.
Pls explain and show every step
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.

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