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
Samuel works for Peregrine Investments 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: |
|
Call on S$ |
|
Put on S$ |
|
Strike price (US$/Singapore dollar) |
|
$1.35 |
|
$1.45 |
|
Premium (US$/Singapore dollar) |
|
$0.047 |
|
$0.065 |
Samuel decides to sell put options on Singapore dollars. What is Samuel's break-even spot rate at maturity?
Transcribed Image Text:(Sell Put Option Break-Even Spot) Samuel Samosir works for Peregrine Investments in Jakarta,
Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/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
$0.047
Put on S$
$1.45
$0.065
Samuel decides to sell put options on Singapore dollars. What is Samuel's break-even spot rate at
maturity? Keep all decimal places.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education