Kiko Peleh's Puts. Kiko Peleh writes a put option on Japanese yen with a strike price of $0.008000/¥ (¥125.00/$) at a premium of 0.0080¢ per yen and with an expiration date six month from now. The option is for ¥12,500,000. What is Kiko's profit or loss at maturity if the ending spot rates are ¥109/$, ¥115/$, ¥121/S, ¥126/S, ¥130/$, ¥136/$, and ¥140/S.
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- A 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 -$375Assume the spot Swiss franc is $0.7000 and the six-month forward rate is $0.6950. What is the minimum price that a six-month American call option with a striking price of $0.6800 should sell for in a rational market? Assume the annualized six-month Eurodollar rate is 3.5 percent. (Do not round intermediate calculations.)Malibu, Inc., is a U.S. company that imports British goods. It plans to use call options to hedge payables of 100,000 pounds in 90 days. Three call options are available that have an expiration date 90 days from now. Fill in the number of dollars needed to pay for the payables (including the option premium paid) for each option available under each possible scenario. Spot Rate of Pound Exercise Price Exercise Price Exercise Price 90 Days = $1.71; = $1.76; = $1.80; Scenario from Now Premium = $.04 Premium = $.06 Premium = $.03 1 $1.65 2 1.74 3…
- Mender 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?Yoyo, a german company expects to pay US$10 million to a supplier in US. It is now December and the payment is due in March. The current spot rate is 1.2100. The company wants to use currency options to hedge the exposure. March currency put options are available and are for 125,000 euros, have a strike price of $1.2200 and the tick size is $0.0001. The cost of the option contract is 2.75 US cents per euro.Assuming that there is no basis,(i) Devise a hedging strategy for Yoyo using currency options.(ii) Advise on the action to be taken by Yoyo and the outcome in case the spot rate in March when the dollars must be paid is:(a) $1.2500 = €1 (b) $1.1800 = €1The current spot rate of Singapore dollar (SGD) is 0.50 USD/SGD. You bought a six-month European put option on SGD which has strike price of 0.55 USD/SGD and a premium 0.01 USD/SGD. Each put option contract trades 1,000,000 Singapore Dollars. Calculate your gain/loss in the put option contract if the market exchange rate turns out to be 0.52 USD/SGD on the contract maturity date. A. 20,000 USD gain. B. 10,000 USD loss. C. 40,000 USD gain. D. 10,000 USD gain.
- American Express sells a call option on euros (contract size is €500,000) at a premium of $0.04 per euro. If the exercise price is $0.91 and the spot price of the euro at date of expiration is $0.93, what is American express’s profit or loss on this call option?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. $60Assume that the Japanese yen is trading at a spot price of 92.04 cents per 100 yen. Further assume that the premium of an American call (put) option with a strike price of 93 is 2.10 (2.20) cents. Calculate the intrinsic value and the time value of the call and put options.
- There is a European call option on the dollar with strike price of Kc = 94 pence per dollar and a European put option on the dollar with a strike price of Kp = 100 pence per dollar. Both have a notional N = 1 and both expire at date T. The current (date t) price of one dollar is St = 100 pence. The current prices of call option is 27.5 (55/2) pence and the price of the put option is 8.33 (25/3) pence. The sterling interest rate for borrowing and lending between dates t and T is 20% (1/5) and the corresponding dollar interest rate is 25% (1/4). Whatarethecurrent (datet) intrinsic and time value of the call and put options?You purchased a put option on Australian dollars for RM0.02 per unit. The strike price was RM4.25, and the spot rate at the time the option was exercised was RM4.38. Assuming that there are 13,830 units in the Australian dollar option.Would you exercise the option? What will your net profit on the put option？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.