lar will rise significantly against the Japanese yen. The current spot rate is 119.00 = $1.00. She must choose between the following 90-0 Should Cachita buy a put on yen or a call on yen? What is Cachita's breakeven price on the option purchased in part (a)? 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 is ¥140.00 = $1.00? CELEBR Should Cachita buy a put on ven or a call on ven? (Select the best choice below)
lar will rise significantly against the Japanese yen. The current spot rate is 119.00 = $1.00. She must choose between the following 90-0 Should Cachita buy a put on yen or a call on yen? What is Cachita's breakeven price on the option purchased in part (a)? 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 is ¥140.00 = $1.00? CELEBR Should Cachita buy a put on ven or a call on ven? (Select the best choice below)
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: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:
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 is ¥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 nse 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).
b. What is Cachita's breakeven price on the option purchased in part (a)?
Cachita's breakeven price on her option choice is $ per *. (Round to five decimal places.)
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Strike Price
Premium
¥126 = $1.00
$0.00003 per
$0.00046 per ¥
¥126 = $1.00
Option
Put on yen
Call on yen
ACCEND
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Done
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