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QUESTION 1

  1. The information in this question pertains to this question andthe next four questions.

    Bama Corp. has sold British pound call options for specula­tivepurposes. The option premium was $.06 per unit, and the exerciseprice was $1.58. Bama will purchase the pounds on the day theoptions are exercised (if the options are exer­cised) in order tofulfill its obligation. For each possible spot rate, find in thenet profit (or loss) to Bama Corp. per unit of currency, assumingthe listed spot rate exists at the time the purchaser of the calloptions considers exercising them.

    Spot rate = $1.60. Net profit or loss is:

1.00000 points

QUESTION 2

  1. Spot rate is $1.62. Net profit or loss per unit is:

1.00000 points

QUESTION 3

  1. Spot rate is $1.64. Net profit or loss per unit is:

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Keith Leannon
Keith LeannonLv2
28 Sep 2019

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QUESTION 4

  1. Spot rate is $1.68. Net profit or loss per unit is:

1.00000 points

QUESTION 5

  1. This question and the following three questions use thisinformation. One year ago, you sold a put option on 100,000 euroswith an expiration date of one year. You received a premium on theput option of $.04 per unit. The exercise price was $1.22. Assumethat one year ago, the spot rate of the euro was $1.20, theone-year forward rate exhibited a discount of 2%, and the one-yearfutures price was the same as the one-year forward rate. From oneyear ago to today, the euro depreciated against the dollar by 4percent. Today the put option will be exercised (if it is feasiblefor the buyer to do so).

    The spot rate on the euro depreciated by 4%. What is the spotrate for the euro after it depreciates? Don't use units (e.g.,don't use a dollar sign).

1.00000 points

QUESTION 6

  1. What was the total loss on the put option? Again, don't use adollar sign, and remember this is the total loss on all shares

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