A put option on Australian dollars with a strike price of $.80 is purchased by a speculator for a premium of $.02. If the Australian dollar’s spot rate is $.74 on the expiration date, should the speculator exercise the option on this date or let the option expire? What is the net profit per unit to the speculator? What is the net profit per unit to the seller of this put option
Q: An investor has purchased United States dollar call options, with an exercise price of A$1.15 and a…
A: Call option is a derivative instruments which gives its buyer a right to buy an asset at pre…
Q: A put option has a strike (exercise) price of $0.82. If the spot exchange rate is $0.79, the put…
A: The put option is purchased when the investor anticipates the spot price of the given asset to go…
Q: Assume that Mr. Binda is a speculator who buys a 90-day British pound option with a strike price of…
A: Call Options gives the right but not the obligation to the buyer the option to buy a bond, stock,…
Q: Emmanuella purchased a put option on British pounds for $.06 per unit. The strike price was $1.85,…
A: given, put = $0.06 per unit k = $1.85 s= $1.69 units = 31250
Q: Use the European option pricing formula to find the value of a six-month call option on Japanese…
A: When valuing a european call option exchange rate the formula to determine the same is:…
Q: An Australian company imports goods from Germany and expects the payment of EUR 250,000 after 60…
A: Call option is a type of option contracts where buyer of call contract is given privilege. The buyer…
Q: One year ago, you sold a put option on 100,000 Australian dollars with an expiration date of one…
A:
Q: Mike sold a put option on British pounds for $.04 per unit. The exercise price was $1.70, and the…
A: Per unit net profit on option = Option premium + ( Spot price - Exercise price ), if the spot price…
Q: Melbourne Capital Ltd considers selling European call options on ANZ Bank Ltd for $1.50 per option.…
A: Hi, there, Thanks for posting the question. As per our Q&A honour code, we must answer the first…
Q: Assume that the Japanese yen is trading at a spot price of 92.04 cents per 100 yen. Further assume…
A: Intrinsic value is the value that helps in measuring the profitability of an option contract based…
Q: You have entered in a put option contract on British pound at a price of $0.04 per British pound.…
A: Put option contract means where we buy an option to sell something . It is our right to sell and not…
Q: You have sold a put option on British pound and receive $0.03 per pound. The exercise price is $0.75…
A: The option is exercised by the buyer of the option when they earn a profit on executing the…
Q: Assume that the Japanese yen is trading at a spot price of 92.04 cents per 100 yen. Further assume…
A: Time value refers to the value of money or share at different point of time. The concept of time…
Q: You have entered in a put option contract on British pound at a price of $0.04 per British pound.…
A: Put option contract is a kind of financial derivative contract in which the owner of the contract…
Q: e is a European call option on the dollar with strike price of Kc = 94 pence per dollar and a…
A: The call option gives opportunity to buy the stock on expiration but no obligations to do that and…
Q: a)A dealer sold a put option on Canadian dollars for $.05 per unit. The strike price was $.78, and…
A: Hello. Since your question has multiple parts, we will solve first question for you. If you want…
Q: Assume that the price of a forward contract is 127.87. The European options on the forward contract…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: Assume that Smith Corporation will need to purchase 200,000 British pounds in 90 days. A call option…
A: Option: An option is a special type of contract which gives its holder the right but not obligation…
Q: Assume that the price of a forward contract is 127.87. The European options on the forward contract…
A: To Find: Price of put option
Q: i) Abdul sold a call option on British pounds for $.05 per unit. The exercise price was $1.80, and…
A: Given : call option on British pounds for $.05 per unit. The exercise price was $1.80, the spot…
Q: a) Assume the euro's spot price at the expiration date (market price) is ¥139/€ The investor's…
A: a) Calculate the profit on the put option by deducting the premium value (P) from put value. Here,…
Q: 42-An American importer imported the goods from the UK for £62,500 and fears an appreciation in…
A: The answer states the computation of payables under Call option hedge
Q: Mr. Saso holds a European put option with a strike price off $1.30/€ and a premium of $0.05/€. At…
A: Answer: The correct answer is option (A) Introduction: A European option provides an investor a…
Q: Consider the position of a call writer who sold a call option on Australian dollars at an exercise…
A: Given, Exercise price = $US0.7600/$A Exercise date = $US0.7475/$A, $US0.7550/$A, $US0.7600/$A,…
Q: MNC needs 400,000 Canadian dollars (C$) in 60 days to cover a payable position. There is a 60-day…
A: As amount is payable, then MNC would buy call option. Premium payable = Canadian dollars required…
Q: Mike purchased a put option on British pounds for $.04 per unit. The exercise price was $1.70, and…
A: Purchase Price of a put option on British pounds =$.04 per unit The exercise price = $1.70, The spot…
Q: pean put option on a barrel of crude oil with a strike price of $50 and a maturity of one-month,…
A: Call and put option gives the opportunity to buy or sell stock at the date of expiration.
Q: a. Should Cachita buy a put on yen or a call on yen? b. What is Cachita's breakeven price on the…
A: Put Option: A put option allows the buyer of the option the right and not the obligation to sell…
Q: Compute for the gain or loss from the derivative contract. And Show Complete solution. The call…
A: Financial derivatives are a kind of financial contract wherein the value of the contract is derived…
Q: Consider the position of a call writer who sold a call option on Australian dollars at an exercise…
A: For a writer of a call option, The Payoff will be, = - Maximum of ( 0 or S - K) ; S =…
Q: ean put and call options both have an exercise price of GH¢50 that expires in 120 days. The…
A: Call give the right to purchase the equity on the expiration but no obligation there to do that.
Q: Tyson Inc. has an account payable in Swedish krona due in 60 days. Which would be an appropriate…
A: To hedge the amount payable in 60 days, the company shall enter int a call option of buying the…
Q: ium of $US0.002/$A. Calculate and graphically depict the profits/losses for this call option…
A: Payoff to call option seller: If Market price <= Strike price (or Exercise price) , then payoff =…
Q: ABC Inc., purchased 75,000 units call option on British pounds for $.021 per unit. The strike…
A: Answer - Calculation of Profit per unit on exercising the option - Exercise Price - $…
Q: FDI may involve mergers with and acquisitions of existing foreign businesses. Select one: O True O…
A: Foreign direct investment - Foreign direct investment is used in the purchase of an interest in a…
Q: Abdul sold a call option on British pounds for $.05 per unit. The exercise price was $1.80, and the…
A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…
Q: An investor has purchased United States dollar call options, with an exercise price of A$1.15 and a…
A: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Petra is an option writer of Australian dollar (A$) options. In anticipation of an appreciation of…
A: The PE seller is writing the option. It means the individual would receive the premium and it would…
Q: For a call option of CN¥100,000 with the $0.16 exercise price and $0.0005 premium, When the spot…
A: A call option is an option contract which gives the holder the right but not an obligation to buy…
Q: . [Put-Call Parity Condition] At date t, there is a European call option on the dollar with a strike…
A: Put call parity With call price (c), put price (p), stock price (s), exercise price (k), risk free…
Q: Which of the following are favourable for a U.S. firm that will purchase Swiss francs in the future?…
A: The Swiss monetary unit is taken into account a safe-haven currency, given the steadiness of Swiss…
Q: Malibu, Inc., is a U.S. company that imports British goods. It plans to use call options to hedge…
A: A company can hedge its exposure to foreign exchange currency risk by entering into derivatives…
Q: According to the interest parity condition, if the domestic interest rate is 12 percent and the…
A: It is an important theory of the international foreign exchange market. It represents the equation…
A put option on Australian dollars with a strike price of $.80 is purchased by a speculator for a premium of $.02. If the Australian dollar’s spot rate is $.74 on the expiration date, should the speculator exercise the option on this date or let the option expire? What is the net profit per unit to the speculator? What is the net profit per unit to the seller of this put option?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- A speculator has purchased United States dollar put options, with an exercise price of A$1.30and a premium of A$0.05 per unit.(a) Calculate the break-even price.(b) Calculate the profit or loss of the option for the speculator if the spot rate at the time the speculator considers exercising the options is : (1) A$1.20 (2) A$1.28 (3) A$1.34.(c) What is the maximum profit and maximum loss for the speculator?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？Consider the position of a call writer who sold a call option on Australian dollars at an exercise price of $US0.7600/$A, and a premium of $US0.002/$A. Calculate and graphically depict the profits/losses for this call option position for the following spot prices at exercise date: $US0.7475/$A, $US0.7550/$A, $US0.7600/$A, $US0.7700/$A, and $US0.7800/$A.
- Consider the position of a call writer who sold a call option on Australian dollars at an exercise price of $US0.7600/$A, and a premium of $US0.002/$A. Calculate and graphically depict the profits/losses for this call option position for the following spot prices at exercise date: $US0.7475/$A, $US0.7550/$A, $US0.7600/$A, $US0.7700/$A, and $US0.7800/$A. Please explain it in Excel. thank youYou have entered in a put option contract on British pound at a price of $0.04 per British pound. When the option was exercised the dollar was selling of 0.63 British pound. Compute your net profit from the option if the exercise price was $1.80 and size of option is 50,000. a. $8,634. b. Pound 8,634. c. $56,5 d. Pound 56,5 00009292d 56,500On the basis of the following information, calculate the price of a call option on the Australian dollar: Spot exchange rate (USD/AUD) 0.75 Exercise exchange rate (USD/AUD) 0.70 Interest rate on the US dollar (per cent per annum 8 Interest rate on the Australian dollar (per cent per annum) 10 Time to expiry 90 Standard deviation (per cent) 10 Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
- A trader focuses principally on the Australian Dollar/Singapore Dollar (A$/S$) cross-rate. The current spot rate is S$0.9/A$. The trader expects after 2 months the cross rate will be S$0.79/A$. The trader plans to purchase an option, and has the following choices: A CALL option on S$ has a strike price of S$0.85/A$ and a premium of A$0.00037/S$. A PUT option on S$ has a strike price of S$0.85/A$ and a premium of A$0.00048/S$. i. Determine if the trader should buy a PUT option or a CALL option on S$. ii. If the trader buys the option decided in (i), determine net profit for the trader if the spot rate after 2 months is as the trader expects. iii. If the spot rate after 2 months is not what the trader expected and is S$0.61/A$, will the option the trader buys be at-the-money, or in-the-money, or out-of-the-money? [[Notably, the trader is purchasing option on S$ -- meaning S$ is the foreign currency in this instance]]A call option on Canadian dollar has a strike (exercise) price of $0.75 per CAD. The present CAD exchange rate is $0.77 per CAD. This CAD call option has an intrinsic value of: A) Positive $0.02 per CAD. B) Zero intrinsic value. C) Negative $0.02 per CAD. D) Positive $0.75 per CAD.An investor has purchased United States dollar call options, with an exercise price of A$1.15 anda premium of A$0.03 per unit.(a) Calculate the break-even price. (b) Calculate the profit or loss of the option for the investor if the spot rate at the time the investor considers exercising the options is : (1) A$1.10 (2) A$1.17 (3) A$1.23.(c) What is the maximum loss for the investor?(d) Explain why the investor could have an unlimited profit if the options are exercised.(e) Explain in general the similarities of and differences between a currency call option and a currency put option.
- Suppose that a European call option to buy a share for $100.00 costs $5.00 and is held untilmaturity. Under what circumstances will the holder of the option make a profit? Underwhat circumstances will the option be exercised? Draw a diagram illustrating how the profitfrom a long position in the option depends on the stock price at maturity of the option. Suppose that a European put option to sell a share for $60 costs $8 and is held untilmaturity. Under what circumstances will the seller of the option (the party with the shortposition) make a profit? Under what circumstances will the option be exercised? Draw adiagram illustrating how the profit from a short position in the option depends on thestock price at maturity of the option.There is a European call option on the dollar with strike price of Kc = 94 pence per dollar and a European put option on the dollar with a strike price of Kp = 100 pence per dollar. Both have a notional N = 1 and both expire at date T. The current (date t) price of one dollar is St = 100 pence. The current prices of call option is 27.5 (55/2) pence and the price of the put option is 8.33 (25/3) pence. The sterling interest rate for borrowing and lending between dates t and T is 20% (1/5) and the corresponding dollar interest rate is 25% (1/4). Whatarethecurrent (datet) intrinsic and time value of the call and put options?A speculator purchases a put option on British Pounds for 0.05$ 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 option