b. What is Calandra's breakeven price on the option purchased in part a? c. Using your answer from part a, what is Calandra's gross profit and net profit (including premium) if the spot rate at the end of 90 days is indeed $0.7604/CS? d. Using your answer from part a, what is Calandra's gross profit and net profit (including premium) if the spot rate at the end of 90 days is $0.8252/CS?
b. What is Calandra's breakeven price on the option purchased in part a? c. Using your answer from part a, what is Calandra's gross profit and net profit (including premium) if the spot rate at the end of 90 days is indeed $0.7604/CS? d. Using your answer from part a, what is Calandra's gross profit and net profit (including premium) if the spot rate at the end of 90 days is $0.8252/CS?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:Calandra Panagakos at CIBC. Calandra Panagakos works for CIBC Currency Funds in Toronto. Calandra is something of a contrarian-as opposed to most of the forecasts, she believes the Canadian dollar (C$) will appreciate versus the U.S. dollar over the coming
90 days. The current spot rate is $0.6751/C$. Calandra may choose between the following options on the Canadian dollar:
a. Should Calandra buy a put on Canadian dollars or a call on Canadian dollars?
b. What is Calandra's breakeven price on the option purchased in part a?
c. Using your answer from part a, what is Calandra's gross profit and net profit (including premium) if the spot rate at the end of 90 days is indeed 50.7604/CS?
d. Using your answer from part a, what is Calandra's gross profit and net profit (including premium) if the spot rate at the end of 90 days is $0.8252/CS?
a. Should Calandra buy a put on Canadian dollars or a call on Canadian dollars? (Select the best choice below.)
O A. Since Calandra expects the Canadian dollar to appreciate versus the US dollar, she should buy a put on Canadian dollars.
O B. Since Calandra expects the Canadian dollar to depreciate versus the US dollar, she should buy a put on Canadian dollars.
O C. Since Calandra expects the Canadian dollar to depreciate versus the US dollar, she should buy a call on Canadian dollars.
✔D. Since Calandra expects the Canadian dollar to appreciate versus the US dollar, she should buy a call on Canadian dollars.
b. What is Calandra's breakeven price on the option purchased in part a?
Calandra's breakeven price on the option is $CS. (Round to five decimal places.)
Transcribed Image Text:Data table
(Click on the icon to import the table into a spreadsheet.)
Option
Strike Price
Put on C$
$0.7003
Call on C$
$0.7003
Print
Premium
$0.00004/C$
$0.00047/C$
Done
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