Suppose that you are a speculator that anticipates a depreciation of the Singapore dollar (S$). You purchase a put option contract on Singaporedollars. Each contract represents S$40,000, with a strike price of $0.68 and an option premium of $0.02 per unit.Suppose that the spot price of the Singapore dollar is $0.62 just before the expiration of the put option contract. At this time, you exercise the option,while also purchasing S$40,000 in the spot market at the current spot rate.Use the drop-down selections to fill in the following table from your (the buyer's) perspective to determine your net profit (on a per contractbasis). (Note: Assume there are no brokerage fees.)Note: Assume there are no brokerage fees.TransactionSelling Price of S$- Purchase Price of S$- Premium Paid for Option= Net ProfitPer Unit$0.68-$0.62-$0.02Per Contract

Step 1 Net Profit Net profit is the amount of money your company makes during a specific time period…

Answered: Suppose that you are a speculator that…

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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23. Assume that a speculator purchases a put option on British pounds (with a strike price of $1.50) for $.05 per unit. A pound option represents 31,250 units. Assume that at the time of the purchase, the spot rate of the pound is $1.51 and continually rises to $1.62 by the expiration date. The highest net profit possible for the speculator based on the information above is: A) $1,562.50. B) -$1,562.50. C) -$1,250.00. D) -$625.00.
Assume that Smith Corp. will need to purchase 200,000 British pounds in 90 days. A call option exists on British pounds with an exercise price of $1.68, a 90-day expiration date, and a premium of $.03. A put option exists on British pounds with an exercise price of $1.69, a 90-day expiration date, and a premium of $.03. Smith Corporation plans to purchase options to cover its future payables. It will exercise the option in 90 days (if at all). It expects the spot rate of the pound to be $1.76 in 90 days. Determine the amount of dollars it will pay for the payables, including the amount paid for the option premium. Group of answer choices $338,000 $342,000 $332,000 $344,000
(a) Suppose a trader takes a position on June 5th 2021, in one September 2021 EURO (EUR) future contract at USD1.3094/EUR. The trader holds the position until the last day of trading when the spot price is USD1.2939/EUR. This will be the final settlement price because of price convergence. The trader has EUR125,000 for this investment. (i) If the trader had a long position and he was a speculator, calculate his profit or loss for the position above. (ii) If the trader had a short position and he was a speculator, calculate his profit or loss for the position above. (iii) If the trader had a long position and he was a hedger, calculate his profit or loss for the position above. (iv) If the trader had a short position and he was a hedger, calculate his profit or loss for the position above. (b) Discuss factors that you would consider in evaluating the political risk associated before making FDI in a foreign country.
An investor has purchased United States dollar call options, with an exercise price of A$1.15 anda premium of A$0.03 per unit.(a) Calculate the break-even price. (b) Calculate the profit or loss of the option for the investor if the spot rate at the time the investor considers exercising the options is : (1) A$1.10 (2) A$1.17 (3) A$1.23.(c) What is the maximum loss for the investor?(d) Explain why the investor could have an unlimited profit if the options are exercised.(e) Explain in general the similarities of and differences between a currency call option and a currency put option.
Choose all expressions that accurately complete the statement below: Writing a European call option on £10,000 at a strike price of $1.80/£ and a premium of $0.02/£: Group of answer choices Obligates the optionholder to purchase £10,000 for $18,000 USD. Will be profitable for the seller when the price of the GBP exceeds the put-call parity rate. Obligates the writer to sell £10,000 on the expiration date if the optionholder chooses to exercise. Allows the optionholder to exercise the option at any point up to the expiration date. Earns the seller a premium of $200.
For a call option of CN¥100,000 with the $0.16 exercise price and $0.0005 premium, When the spot exchange rate is $0.1602, the call option holder should __ the call? a. exercise b. not exercise
Doctor Dumpkins is bullish on the British pound so he sells a one-month put for $0.03. The strike price of the call is $1.24. On the expiration day, the spot price of the British pound is $1.27. Calculate the break-even price, the option payoff at expiration, and the net profit at expiration.
Nucor Corporation would like to use options to hedge a 18,324,000 Philippine Peso payable. Both call options and put options have the premium of $0.002 (per unit of Philippine Peso) and the exercise price $0.019 per Philippine Peso. The option will not be exercised until the expiration date, if at all. Should Nucor Corporation buy call options on Philippine Peso or buy put options on Philippine Peso? If the spot rate at the time of maturity is $0.017 per Philippine Peso, what is the total amount paid by the corporation if it acts rationally (after accounting for the premium paid)? Buy call options on phillipine peso 348,156 buy put options on phillipine peso 384,804 buy call options on phillipine peso 274,860 buy put options on phillipine peso 311,508
Melbourne Capital Ltd considers selling European call options on ANZ Bank Ltd for $1.50 per option. The current market price is $17.70 on 28th September 2020, the exercise price is $20, and the maturity of each call option is 6 months. (i) Under what circumstances does the investor make a profit? (ii) Under what circumstances will the option be exercised? (iii) How many call options should the investor sell to raise a total capital of $1,260,000?
A put option with an exercise price of $56 will expire in 180 days. The underlying asset price of today is $160 . The underlying asset price at expiration is $126. The risk-free rate is 2%, What is the lower bounds for an European put?
Sysco corporation has purchased currency call options to hedge a 4,320,000 Swedish krona payable. The premium is $0.015 (per unit of Swedish krona) and the exercise price of the option is $0.097 per Swedish krona. If the spot rate at the time of maturity is S0.105 per Swedish krona, what is the total amount paid by the corporation if it acts rationally (after accounting for the premium paid)? Question 27 options: S 419,040. $354,240. $518,400. S453,600. $483,840.

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