Speculating with Currency Call Options. ABC Inc., purchased 75,000 units call option on British pounds for $.021 per unit. The strike price was $ 0.78 and the spot rate at the time the option was exercised was $0.86. Assume there are 25,000 units per British pound option. What was ABC's net profit per option?

Speculating with Currency Call Options. ABC Inc., purchased 75,000 units call option on British pounds for $.021 per unit. The strike price was $ 0.78 and the spot rate at the time the option was exercised was $0.86. Assume there are 25,000 units per British pound option. What was ABC's net profit per option?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 21QA

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Speculating with Currency Call Options. ABC Inc., purchased 75,000 units call option on British pounds for $.021 per unit. The strike price was $ 0.78 and the spot rate at the time the option was exercised was $0.78. Assume there are 25,000 units per British pound option. What was ABC's net profit per unit option?
Speculating with Currency Call Options. ABC Inc., purchased 75,000 units call option on British pounds for $.021 per unit. The strike price was $ 0.78 and the spot rate at the time the option was exercised was $0.98. Assume there are 25,000 units per British pound option. What was ABC's net profit option?
Speculating with Currency Call Options. ABC Inc., purchased 75,000 units call option on British pounds for $.021 per unit. The strike price was $ 0.78 and the spot rate at the time the option was exercised was $0.89. Assume there are 25,000 units per British pound option.
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a)A dealer sold a put option on Canadian dollars for $.05 per unit. The strike price was $.78, and the spot rate at the time the option was exercised was $.74. Assume that the dealer immediately sold off the Canadian dollars received when the option was exercised. Also assume that there are 50,000 units in a Canadian dollar option. What was the dealer’s total net profit/loss on the put option? b) A U.S. corporation has purchased currency call options to hedge a 70,000 pound payable. The premium is $.02 and the exercise price of the option is $.50. If the spot rate at the time of maturity is $.65, what is the total amount paid by the corporation if it acts rationally? c) On January 1st, a US firm ordered raw material from Japan and agreed to pay 100 million yen for this order on April 1st. It negotiated a 3-month forward contract to obtain 100 million Japanese yen on that date at $.009. On February 1st, the Japanese firm informed the US firm that it will not be able to fulfil…
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