Page 1 3) Consider an American call option on New Zealand dollars (NZ$) with a strike price of $0.8100/NZ$ traded at a premium of $0.0192 per NZ$ and with an expiration date three months from now. The option is for NZ$100,000. a. Suppose that you have bought such a call option. Plot your profit or loss on a graph should you exercise before maturity at a time when the NZ$ is traded spot at between $0.7000/NZ$ and $0.9200/ NZ$. Find the break-even exchange rate. b. Repeat (a) if you have sold such a call option. of 2

Page 1 3) Consider an American call option on New Zealand dollars (NZ$) with a strike price of $0.8100/NZ$ traded at a premium of $0.0192 per NZ$ and with an expiration date three months from now. The option is for NZ$100,000. a. Suppose that you have bought such a call option. Plot your profit or loss on a graph should you exercise before maturity at a time when the NZ$ is traded spot at between $0.7000/NZ$ and $0.9200/ NZ$. Find the break-even exchange rate. b. Repeat (a) if you have sold such a call option. of 2

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

You plan to retire in 35 years and can invest to earn 6.85 percent. You estimate that you will need $82,000 at the end of each year for an estimated 30 years after retirement, and you expect to earn 4.5 percent during those retirement years. How much do you need to set aside at the end of each year to accumulate the money necessary for your retirement? (Assume year-end cash flows.) I will need this much at retirement _____________and will need to set aside ___________per year (at the end of each year.
You own a 10-acre blueberry farm. You could farm the land yourself or rent it out for $7,000 per year. Another option is to sell the land this year at its current market price of $80,000. The price of the land next year will be $78,000. If you sell it, your group has an investment opportunity from which you expect to make a return of 6 percent per year. What is the opportunity cost to you of using the land to grow blueberries for a year? O a. $2,000 O b. $4,800 OC. $5,000 d. $9,800
What should be the time to maturity, IN YEARS, of the bond that has 7.7% of coupon rate and has the yield to maturity of 10% if it sells for $868? show calculations 6.97 3.09 8.74 7.92 3.06
1
do fast
5 Question Let Ya,n be the present value of an n-year term continuous annuity of $1 per year for an insured aged x. Let Y be the present value of a whole life continuous annuity of $1 per year for an insured aged x. Given a constant force of interest, 8, show that: 1 бп Cov (Yz,n, Yz) = (A — e¯ðª‚„Ez (1 − Āz+n) — Ã‚±‚ñ¦Ã‚) 82 n. - -
2. You purchase special equipment that reduces defects by $10,000 per year on an item. This item is sold on contract for the next five years. After the contract expires, the special equipment will save approximately $2,000 per year for five years. You assume that the machine has no market value at the end of ten years. How much can you afford to pay for this equipment now if you require a 20% annual return on your investment?
Determine the future value of $580 in 3 years from today at a steady interest rate of 7.5 percent.
A corporate bond pays 6% of its face value once per year. If this $10,000 10-year bond sells now for $10,450, what yield will be earned on this bond? Assume the bond will be redeemed at the end of 10 years for $10,000. The yield to maturity is %. (Round to two decimal places.)