Cachita Haynes. Cachita Haynes works as a currency speculator for Vatic Capital of Los Angeles. Her latest speculative position is to profit from her expectation that the U.S. dollar will rise significantly against the Japanese yen The current spot rate is 121.00-$1.00. She must choose between the following 90-day options on the Japanese yen a. Should Cachita buy a put on yen or a call on yen? b. What is Cachita's breakeven price on the option purchased in part (a)? c. Using your answer from part (a), what is Cachita's gross profit and net profit (including premium) if the spot rate at the end of 90 days is ¥140.00 = $1.00? a. Should Cachita buy a put on yen or a call on yen? (Select the best choice below) OA. Cachita should buy a call on yen to profit from the rise of the dollar (the fall of the yen) O B. Cachita should buy a call on yen to profit from the fall of the dollar (the rise of the yen) OC. Cachita should buy a put on yen to profit from the fall of the dollar (the rise of the yen). O D. Cachita should buy a put on yen to profit from the rise of the dollar (the fall of the yen) Data table (Click on the following icon in order to copy its contents into a spreadsheet) Strike Price V124 $1.00 V124 $1.00 Premium 50.00003 per V $0.00046 per V Option Put on yen Call on yen D Print Done - X
Cachita Haynes. Cachita Haynes works as a currency speculator for Vatic Capital of Los Angeles. Her latest speculative position is to profit from her expectation that the U.S. dollar will rise significantly against the Japanese yen The current spot rate is 121.00-$1.00. She must choose between the following 90-day options on the Japanese yen a. Should Cachita buy a put on yen or a call on yen? b. What is Cachita's breakeven price on the option purchased in part (a)? c. Using your answer from part (a), what is Cachita's gross profit and net profit (including premium) if the spot rate at the end of 90 days is ¥140.00 = $1.00? a. Should Cachita buy a put on yen or a call on yen? (Select the best choice below) OA. Cachita should buy a call on yen to profit from the rise of the dollar (the fall of the yen) O B. Cachita should buy a call on yen to profit from the fall of the dollar (the rise of the yen) OC. Cachita should buy a put on yen to profit from the fall of the dollar (the rise of the yen). O D. Cachita should buy a put on yen to profit from the rise of the dollar (the fall of the yen) Data table (Click on the following icon in order to copy its contents into a spreadsheet) Strike Price V124 $1.00 V124 $1.00 Premium 50.00003 per V $0.00046 per V Option Put on yen Call on yen D Print Done - X
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 30QA
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Question
Ef 475.
Transcribed Image Text:←
Cachita Haynes. Cachita Haynes works as a currency speculator for Vatic Capital of Los Angeles. Her latest speculative position is to profit from her expectation that the U.S. dollar will rise significantly against the Japanese yen. The current spot rate is 121.00 = $1.00. She
must choose between the following 90-day options on the Japanese yen
a. Should Cachita buy a put on yen or a call on yen?
b. What is Cachita's breakeven price on the option purchased in part (a)?
c. Using your answer from part (a), what is Cachita's gross profit and net profit (including premium) if the spot rate at the end of 90 days is ¥140.00 = $1.00?
a. Should Cachita buy a put on yen or a call on yen? (Select the best choice below.)
O A. Cachita should buy a call on yen to profit from the rise of the dollar (the fall of the yen).
O B.
Cachita should buy a call on yen to profit from the fall of the dollar (the rise of the yen).
O C. Cachita should buy a put on yen to profit from the fall of the dollar (the rise of the yen).
O D. Cachita should buy a put on yen to profit from the rise of the dollar (the fall of the yen).
Data table
C
(Click on the following icon in order to copy its contents into a spreadsheet.)
Strike Price
¥124 $1.00
¥124 $1.00
Premium
$0.00003 per ¥
$0.00046 per ¥
Option
Put on yen
Call on yen
Print
Done
- X
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