Cachita Haynes. Cachita Haynes works as a currency speculator for Vatic Capital of Los Angeles. Her latest speculative position is to profit from her expectation that the U.S. dollar will rise significantly against the Japanese yen. The current spot rate is ¥119.00 = $1.00 She must choose between the following 90-day options on the Japanese yen: E a. Should Cachita buy a put on yen or a call on yen? b. What is Cachita's breakeven price on the option purchased in part (a)? c. Using your answer from part (a), what is Cachita's gross profit and net profit (including premium) if the spot rate at the end of 90 days ¥140.00 $1.00? a. Should Cachita buy a put on yen or a call on yen? (Select the best choice below.) A. Cachita should buy a put on yen to profit from the rise of the dollar (the fall of the yen). OB. Cachita should buy a call on yen to profit from the fall of the dollar (the rise of the yen). OC. Cachita should buy a call on yen to profit from the rise of the dollar (the fall of the yen). OD. Cachita should buy a put on yen to profit from the fall of the dollar (the rise of the yen).

Cachita Haynes. Cachita Haynes works as a currency speculator for Vatic Capital of Los Angeles. Her latest speculative position is to profit from her expectation that the U.S. dollar will rise significantly against the Japanese yen. The current spot rate is ¥119.00 = $1.00 She must choose between the following 90-day options on the Japanese yen: E a. Should Cachita buy a put on yen or a call on yen? b. What is Cachita's breakeven price on the option purchased in part (a)? c. Using your answer from part (a), what is Cachita's gross profit and net profit (including premium) if the spot rate at the end of 90 days ¥140.00 $1.00? a. Should Cachita buy a put on yen or a call on yen? (Select the best choice below.) A. Cachita should buy a put on yen to profit from the rise of the dollar (the fall of the yen). OB. Cachita should buy a call on yen to profit from the fall of the dollar (the rise of the yen). OC. Cachita should buy a call on yen to profit from the rise of the dollar (the fall of the yen). OD. Cachita should buy a put on yen to profit from the fall of the dollar (the rise of the yen).

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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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$ $1.35 $0.047 Put on S$ $1.589 $0.006 Samuel decides to sell one put option in Singapore dollars. What will be Samuel's profit/loss if the ending spot rate is $1.314/S$ in 90 days? Keep all decimal places.
Q1-13 If a speculator observes that the current 3-month forward rate on Swiss francs is 20¢ = 1 franc, but he/she expects that the spot rate in 3 months will be 30¢ = 1 franc, then this speculator would now a. buy dollars on the forward market. b. buy francs on the forward market. c. sell francs on the forward market. d. buy francs on the spot market and simultaneously sell francs on the 3-month forward market if the current spot rate is 25¢ = 1 franc.
Tyson Inc. has an account payable in Swedish krona due in 60 days. Which would be an appropriate hedge? Question 9 options: Enter into a forward contract to sell Swedish krona in two months Borrow Swedish krona for 60 days for the purpose of a money market hedge Buy a put option on the Swedish krona, expiring in 60 days Buy a call option on the Swedish krona, expiring in 60 days
to-date with security updates, fixes, and Improvements, choose Check for Updates. A speculator has purchased United States dollar put options, with an exercise price of A$1.30 and 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$1.34 c) What is the maximum profit and maximum loss for the speculator? Focus
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will depreciate versus the U.S. dollar in the coming 90 days, probably to about $1.35/S$. 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$ $1.34 $0.075 Put on S$ $1.37 $0.006 Samuel decides to sell call options in Singapore dollars. What is Samuel's (net) profit/loss (in dollars) per option if the spot rate is $1.56/S$ at maturity?
The next problem is about covered interest rate parity. Assume that the home country is the Philippines, and a Filipino investor is mulling whether or not to invest P1 million in the US or in the PH. Bonds in either country mature in just 1 year. The initial parameters are as follows: iPH ius = = 8% ● et+1 = 12% • et P50/USD = P55/USD Answer the following: • If the Filipino invests in a PH bond for 1 year, how much will she earn? • If the Filipino invests in a US bond for 1 year, how much will she earn in peso terms? • Is there a difference between the two values above? • How much did the peso depreciate/appreciate from time t to t + 1? • For the investor to be indifferent between investing here and abroad, she should engage in a forward exchange rate contract at what rate Fț?
Ruth trades currencies for Industrial and Commercial Bank of China (ICBC) in Beijing. She is currently interested in the U.S. dollar/Australian dollar ($/A$) cross-rate. The current spot rate is $0.7200/A$. Ruth believes that the Australian dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $0.8100/A$. She has the following options on the Australian dollar to choose from: Option Put on A$ Call on A$ Strike Price $0.7500/A$ $0.7500/A$ Premium $0.00004/A$ $0.00048/A$ a. Should Ruth buy a put on Australian dollars or a call on Australian dollars? b. What is Ruth's breakeven price on the option purchased in part (a)?
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 $0.02. If the future spot rate of the Canadian dollar is 0.85 USD/CAD, what is Andrea's net profit or loss per unit?
Alex is a currency speculator working for CIBC Currency funds in Toronto. He focuses nearly all of his time and attention on the U.S. dollar /Canadian dollar ($/C$) exchange rate. The current spot rate is $1.3546/C$. He believes that the Canadian dollar (C$) will appreciate versus the U.S. dollar over the coming 90 days. He can choose between the following options on Canadian dollar: Option Strike price Premium Put on C$ $1.400/C$ $0.00045/C$ Call on C$ $1.415/C$ $0.00048/C$ Should Alex buy a put option on Canadian dollars or a call option on Canadian dollars?
1. Consider a large Australian cotton farmer who has just planted her crop. Once grown, she plans to export her production to China: Suppose the Australian cotton farmer goes short on a cotton no. 2 futures contract on the ICE exchange. Go to theice.com and look up the contract. What is the contract size? Is the contract settled with physical delivery or cashsettlement? 2. What is the role of the exchangeand clearinghouse in futures and options market?
(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.
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$ $1.371 $0.047 Put on S$ $1.37 $0.006 Samuel decides to buy call options in Singapore dollars. What will be Samuel's profit/loss if the ending spot rate is $1.286/S$ in 90 days? Keep all decimal places.

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