Problem 7.11 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 $0.6750/C$. Calandra may choose between the following options on the Canadian dollar: Option Put on C$ Call on C$ a. b. C. d. рие 6758 Strike Price $0.7000 $0.7000 0.68997 рит Should Calandra/buy a put on Canadian dollars or a call on Canadian dollars? What is Calandra's breakeven price on the option purchased in part (a)? 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 $0.7600? 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 $0.8250? St gross profit= Strike-price- price after go days. = 0.7 10.7 Premium $0.00003/S$ $0.00049/S$ 0.6750 6.7 0.70049 0. - а = 0.

Problem 7.11 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 $0.6750/C$. Calandra may choose between the following options on the Canadian dollar: Option Put on C$ Call on C$ a. b. C. d. рие 6758 Strike Price $0.7000 $0.7000 0.68997 рит Should Calandra/buy a put on Canadian dollars or a call on Canadian dollars? What is Calandra's breakeven price on the option purchased in part (a)? 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 $0.7600? 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 $0.8250? St gross profit= Strike-price- price after go days. = 0.7 10.7 Premium $0.00003/S$ $0.00049/S$ 0.6750 6.7 0.70049 0. - а = 0.

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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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?
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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$ $1.36 $0.077 Put on S$ $1.37 $0.006 Samuel decides to buy call options in Singapore dollars. What is Samuel's Break-Even spot rate at maturity? Keep the sign and all three decimal places.

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