Answered: Randy Rudecki purchased a call option… | bartleby

International Financial Management

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 5ST

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Randy Rudecki purchased a call option on British pounds for $0.07 per unit. The strike price was $1.32 and the spot rate at the time the option was exercised was
O $1.38. Assume there are 30,500 units in a British pound option. What was Randy's net profit on this option? Use a minus sign to enter loss values, if any, Round your
answer to the nearest cent.

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2. 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. Discuss (briefly) the answer. Add necessary graphs to your discussion.
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Mike purchased 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 $1.59. Assume there are 50,250 units in a British pound option. What was Mike’s per unit net profit on the option? What was Mike’s total net profit on the option? Calculate the break-even spot rate (at expiration) for Mike. Discuss (briefly) the answer. Add necessary graphs to your discussion
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A speculator purchases a put option on British Pounds for 0.05$ 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
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