Assume that Mr. Binda is a speculator who buys a 90-day British pound option with a strike price of $27.02. Assume one option contract specifies 10,000 units and the current spot price as of date is $26.87. Mr. Binda pays premium of $0.05 per unit for the call option and no other charge (such as brokerage fee). Just on expiration date, the spot rate of a pound reaches $27.18. Required a) Determine the profit or loss if the option is exercised b) Determine the value of the call option if the option is exercised
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- Assume that Smith Corporation 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 $.04. 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. A. $336,000. B. $344,000. C. $332,000. D. $360,000. E. $338,000.An investor enters a three-year swap contracts bypaying fixed price and receive spot price of Applesstock at the end of each year. The spot price ofApple's stock is Ș515 now, and the risk-free rate is3%.a. Draw the synthetic forwards contracts tomimicking this swap contract.o. Compute the rational fixed price based onarbitrage-free principalA speculator is considering the purchase of a 6-month Swiss franc call option on 50,000 francs with a strike price of $1.0885/SFr The premium is $0.0075/Sfr. The spot price is $1.0822/Sfr and the 60-day forward rate is $1.0880/SFr. The speculator believes the Franc will appreciate to $1.0994/Sfr over the next six months. What is the profit or loss if the franc appreciates only to the forward rate at the end of the 6 months? A. $170 B. -$235 C. $450 D -$375
- A speculator purchases a put option on British Pounds for 0.05$ per unit; the strike price is 1.50$. A pound option represents 31.250 units Assume that at the time of the purchase, the spot rate of the pound is 151$ and continually rises to 1.62$ by the expiration date. 1. Compute the highest net profit possible for the speculator based on the information above? 2. Compute the highest profit/loss for the seller of this put optionMender Co. will be receiving 700,000 Australian dollars in 180 days. Currently, a 180-day call option with an exercise price of $.74and a premium of $.02 is available. Also, a 180-day put option with an exercise price of $.72 and a premium of $.02 is available. Mender plans to purchase options to hedge its receivables position. Assume that the spot rate in 180 days is $.73. (1) Should the company use call options or put options? Why? (2) Calculate the amount received from the currency option hedge (after considering the premium paid). (3) Would the company have received more without hedging?Three months ago, you sold a put option contract on Swiss franc with a strike price of $.60/SF and an option price of $.0060 per SF. Contract size is 10,000 SF. The option expires today when the value of Swiss franc is $.625. What is your total profit or loss on your investment? A. -$310 B. -$60 C. $0 D. $60
- 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 311,508i) Abdul sold a call option on British pounds for $.05 per unit. The exercise price was $1.80, and the spot rate at the time the pound option was exercised was $1.92. Assume there are 31,250 units in a British pound option contract. What was Abdul’s per unit net profit on the option contract? What was Abdul’s total net profit on the option contract? Calculate the break-even spot rate (at expiration) for Abdul. ii) Mike sold a put option on British pounds for $.04 per unit. The exercise price was $1.70, and the spot rate at the time the pound option was exercised was $1.68. Assume there are 50,250 units in a British pound option. What was Mike’s per unit net profit on the option? What was Mike’s total net profit on the option? Calculate the break-even spot rate (at expiration) for Mike.Bruce bought a bank bill with a face value of $1 million, priced to yield 3.30 per cent per annum over the remaining 200 days until it matures. Bruce also sold a futures contract on a 90-day bank bill that expires in 110 days' time for the futures price of 96.55. Noting that the face value of the bill underlying these contracts is also $1 million, and that at the maturity of the futures contracts, the bank bill he holds will have 90-days to maturity, he decides to deliver the bank bill to close his short futures position. i) Identify the amount and timing of Bruce's net cash payments and receipts and ii) calculate the yield (simple interest, in percent per annum) he will achieve on his investment in the bank bill. (Ignore any cash flows from marking-to-market.)
- 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 $1.27. Calculate the break-even price, the option payoff at expiration, and the net profit at expiration.FAB Corporation will need 200,000 Canadian dollars (C$) in 90 days to cover a payable position. Currently, a 90-day call option with an exercise price of $.75 and a premium of $.01 is available. Also, a 90-day put option with an exercise price of $.73 and a premium of $.01 is available. FAB plans to purchase options to hedge its payable position. Assuming that the spot rate in 90 days is $.71, what is the net amount paid, assuming FAB wishes to minimize its cost? A. $152,000. B. $144,000. C. $150,000. D. $148,000.1. ABC Company Ltd purchased 5000 cocoa futures contract at a price of $150 per contract. As part of the contract, ABC was required to deposit $10 per contract initially in their account with the maintenance margin set at $5 per contract. If the price per contract falls to $142 overnight, what action will the exchange require ABC to undertake? 2. Emmanuella purchased a put option on British pounds for $.06 per unit. The strike price was $1.85, and the spot rate at the time the pound option was exercised was $1.69. Assume there are 31,250 units in a British pound option. What was Emmanuella’s net profit on the option?