a) What option would you buy? b) What is the gross and net profit (i.e. accounting for the premium) if the spot rate at the end of 90 days is $0.80/S$? c) What is the gross and net profit (i.e. accounting for the premium) if the spot rate at the end of 90 days is $0.70/S$?
a) What option would you buy? b) What is the gross and net profit (i.e. accounting for the premium) if the spot rate at the end of 90 days is $0.80/S$? c) What is the gross and net profit (i.e. accounting for the premium) if the spot rate at the end of 90 days is $0.70/S$?
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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Transcribed Image Text:Question 14
Suppose you expect that Singapore dollar will appreciate versus the US$ in the coming 90
days. The current spot rate is $0.60/S$. You expect an appreciation to $0.70/S$. The
following options are available to you:
Option
Put on S$
Call on S$
Show Transcribed Text
Strike Price
$0.65/S$
$0.65/S$
Premium
$0.0002/S$
$0.045/S$
a) What option would you buy?
b) What is the gross and net profit (i.e. accounting for the premium) if the spot rate at the
end of 90 days is $0.80/S$?
c) What is the gross and net profit (i.e. accounting for the premium) if the spot rate at the
end of 90 days is $0.70/S$?
Subject: international finance
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