Question

A put option on British Pounds with an exercise price of $2.00 is purchased by a...

A put option on British Pounds with an exercise price of $2.00 is purchased by a speculator for a premium of $0.05. If the British Pound's spot rate is $2.10 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? Please show formulas

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
a. A speculator purchased a call option on Japanese Yen at a strike price of $0.70...
a. A speculator purchased a call option on Japanese Yen at a strike price of $0.70 and for a       premium of $.06 per unit. At the time the option was exercised if the Japanese Yen spot       rate was $.75 a) Find the speculator’s net profit per unit? b) If each contract is made up of 62500 units what is the net profit per contract? c) At which spot price will the speculator break even? d) What is the...
Randy purchased a call option on British pounds for $.02 per unit. The strike price was...
Randy purchased a call option on British pounds for $.02 per unit. The strike price was $1.45 and the spot rate at the time the option was exercised was $1.46. Assume there are 31,250 units in a British pound option. What was Randy’s net profit on this option? What is the net profit per unit to the seller of this option?                                
You sell a call option on British pounds receiving a premium of $.02 per unit, with...
You sell a call option on British pounds receiving a premium of $.02 per unit, with an exercise price of $1.64; the option will not be exercised until the expiration date, if at all. If the spot rate on the expiration date is $1.68, will the call buyer exercise the option? What is your net gain or loss per unit? What is the net gain or loss for the call buyer?
(4 pts) Auburn Co purchased Canadian dollar put options for speculative purposes.  Each option was purchased for...
(4 pts) Auburn Co purchased Canadian dollar put options for speculative purposes.  Each option was purchased for a premium of US$0.03 per unit, with an exercise price of US$0.86/1CAD.  Auburn will purchase the Canadian dollars just before it exercises the options (if it is feasible to exercise the options).  It plans to wait until the expiration date before deciding whether to exercise the options.  In the following table, fill in the net profit (or loss) per unit to Auburn Co based on the listed...
A call option with a strike price of $1.30/€ and a premium of $0.03/€ is executed...
A call option with a strike price of $1.30/€ and a premium of $0.03/€ is executed as the market price is $1.39/€. The buyer of the option has purchased ten contracts (one contract is for €12,500). The total profit amounts to: Question options: €7,500 $7,500 €11,250 $11,250 Question 16 (1 point) Saved A trader holds a European put option with a strike price off $1.30/€ and a premium of $0.05/€. At the expiration date the market rate is $1.40/€. What...
Writing Put Options. A put option on Indiana stock specifies an exercise price of $23. Today...
Writing Put Options. A put option on Indiana stock specifies an exercise price of $23. Today the stock’s price is $24. The premium on the put option is $3. Assume the option will not be exercised until maturity, if at all. Complete the following table: 5 MARKS Assumed Stock Price at the Time                             Net Profit or Loss per Share to Be Earned the Put Option Is About to Expire                           by the Writer (Seller) of the Put Option            $20 $21...
Malibu, Inc., is a U.S. company that export goods to British. It plans to use put...
Malibu, Inc., is a U.S. company that export goods to British. It plans to use put options to hedge receivables of 100,000 pounds in 90 days. Three put options are available that have an expiration date 90 days from now. Fill in the number of dollars needed to receive for the receivables (including the option premium paid) for each option available under each possible scenario Scenario Spot rate of pound in 90 days Probability Option A Exercise price= $1.62 Premium...
You purchase 100 put options on a stock with exercise price of $52 at a premium...
You purchase 100 put options on a stock with exercise price of $52 at a premium of $4.30 per put. You also purchase 100 call options on the same stock with exercise price of $54 and call premium of $5.10 per call. If at expiration of the options (the options expire on the same date), the stock's price is $52.79, calculate your profit. According to put-call parity, the present value of the exercise price is equal to the: A. Stock...
A call and a put are held in a portfolio, having an exercise price of $150,...
A call and a put are held in a portfolio, having an exercise price of $150, the premium for the call is $5.00, the premium for the put is $2.00, and the risk free rate is 6%. A. Using continuous compounding what is the Spot price of the stock if both options expire in 3 years B. Using monthly compounding, what is the Spot price of the stock if both options expire in 3 years? Show formula
Assume a put option on euros is written with a strike price of $1.0800/€ at a...
Assume a put option on euros is written with a strike price of $1.0800/€ at a premium of $0.0038/€ and with an expiration date three months from now. The option is for €100,000. Calculate your profit or loss should you exercise before maturity at a time when the euro is traded spot at $1.2500/€, $1.0100/€, $1.1000/€, $1.2500/€.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT