1. Answer the following questions regarding options: (1) A put option on yen is written with a strike price of ¥105.00/$. How much profit/loss will you make if you choose to exercise the option at ¥107.00/$? (2) A call option on euros is written with a strike price of $1.30/euro. How much profit/loss will you make if you choose to exercise the option at $1.45/euro? (3) A call option on UK pounds has a strike price of $2.05/£ and a cost of $0.02. What is the break-even price for the option? (4) Your U.S firm has an accounts payable denominated in UK pounds due in 6 months. What you should do by using currency options to protect yourself against unexpected changes in the dollar/pound exchange rate? (5) What will be your maximum gain and maximum loss in dollars, if you short a euro call option against dollar with strike price of $1.35/euro and at a premium of $0.07? (6) What will be your maximum gain and maximum loss, if you long a UK pounds put option with strike price of $1.80/£ and a cost of $0.7? (7) What will be your maximum gain and maximum loss, if you short a Japanese Yen put option with strike price of ¥103.00/$ and a cost of ¥10?
1. Answer the following questions regarding options: (1) A put option on yen is written with a strike price of ¥105.00/$. How much profit/loss will you make if you choose to exercise the option at ¥107.00/$? (2) A call option on euros is written with a strike price of $1.30/euro. How much profit/loss will you make if you choose to exercise the option at $1.45/euro? (3) A call option on UK pounds has a strike price of $2.05/£ and a cost of $0.02. What is the break-even price for the option? (4) Your U.S firm has an accounts payable denominated in UK pounds due in 6 months. What you should do by using currency options to protect yourself against unexpected changes in the dollar/pound exchange rate? (5) What will be your maximum gain and maximum loss in dollars, if you short a euro call option against dollar with strike price of $1.35/euro and at a premium of $0.07? (6) What will be your maximum gain and maximum loss, if you long a UK pounds put option with strike price of $1.80/£ and a cost of $0.7? (7) What will be your maximum gain and maximum loss, if you short a Japanese Yen put option with strike price of ¥103.00/$ and a cost of ¥10?
