You have bought 6-month put options on the Mexican Peso with a strike price of 0.0490 $/peso at a price of 0.014 cents per peso for 30,000,000 pesos (careful of the decimal points!). Your cost of capital is an annual 9% rate. If the value of the peso declines to 0.0471 in 6 months, what is the total future value (including the cost) of your option position?
You have bought 6-month put options on the Mexican Peso with a strike price of 0.0490 $/peso at a price of 0.014 cents per peso for 30,000,000 pesos (careful of the decimal points!). Your cost of capital is an annual 9% rate. If the value of the peso declines to 0.0471 in 6 months, what is the total future value (including the cost) of your option position?
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
![You have bought 6-month put options on the Mexican Peso with a strike price of 0.0490 $/peso at a price of 0.014 cents per peso for
30,000,000 pesos (careful of the decimal points!). Your cost of capital is an annual 9% rate. If the value of the peso declines to 0.0471 in 6
months, what is the total future value (including the cost) of your option position?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F91a0a16b-e30b-4dc8-af78-42f3da97d86e%2F71b4f617-4a8d-4d38-93aa-6bc6d388ee18%2F6npx3ks_processed.jpeg&w=3840&q=75)
Transcribed Image Text:You have bought 6-month put options on the Mexican Peso with a strike price of 0.0490 $/peso at a price of 0.014 cents per peso for
30,000,000 pesos (careful of the decimal points!). Your cost of capital is an annual 9% rate. If the value of the peso declines to 0.0471 in 6
months, what is the total future value (including the cost) of your option position?
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
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](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
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…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
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