Question

Citigroup buys a call option on euros (contract size is €600,000) at a premium of $0.02...

Citigroup buys a call option on euros (contract size is €600,000) at a premium of $0.02 per euro. If the exercise price is $1.44/€ and the spot price of the euro at date of expiration is $1.48/€,

A. Will this option be exercised, that is, is in-the-money or out-of-the-money? Why? (2 points)

B. What is Citigroup's profit (or loss) on the call option? (3 points)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Calculation is shown below

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
Assume that you buy a call option on euros with a strike price of $1.25/€ at...
Assume that you buy a call option on euros with a strike price of $1.25/€ at a premium of 3.80 cents per euro ($0.0380/€) and an expiration in three months. The option is for €100,000. Calculate your total profit or loss if you exercise when the euro spot rate is each of the following: $1.10/€, $1.20/€, $1.30/€, $1.40/€
5. Assume a call option on euros is written with a strike price of $1.2500/€ at...
5. Assume a call option on euros is written with a strike price of $1.2500/€ at a premium of 3.80¢ per euro ($0.0380/€) and with an expiration date three months from now. The option is for €100,000. Calculate your profit or loss (in each of the following scenarios) when the euro is traded at the following spot rates: (1) $1.12/€ (2) $1.24/€ (3) $1.32/€? (4) $1.36/€
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...
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?
NASDAQ Call option for EUR with exercise price of $1.2515/EUR has a premium of 0.07/EUR. If...
NASDAQ Call option for EUR with exercise price of $1.2515/EUR has a premium of 0.07/EUR. If you buy 1 contract and you hold this contract till the expiration date. On that date, the spot price for EUR is $1.1122/EUR, what is your dollar profit/loss including the premium you paid (for the whole contract)?
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/€.
NASDAQ Call option for EUR with exercise price of $1.2515/EUR has a premium of 0.07/EUR. If...
NASDAQ Call option for EUR with exercise price of $1.2515/EUR has a premium of 0.07/EUR. If you buy 1 contract and you hold this contract till the expiration date. On that date, the spot price for EUR is $1.1122/EUR, what is your dollar profit/loss including the premium you paid (for the whole contract)? If it is a loss of say 250, put -250 in your answer.
I have 250,000 euros in my bank account. Currently, 1 euro = $1.10. I want to...
I have 250,000 euros in my bank account. Currently, 1 euro = $1.10. I want to sell a call option on 250,000 euros (Exercise price=$1.10, premium=$0.02/euro). a. Draw the profit graphs for both positions separately b. Why would I sell a call option when I already have the underlying asset (euro) in my bank account? c. What will be my total profit if the exchange rate at expiration is $1.05/euro? d. What will be my total profit if the exchange...
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...
A call option on the euro expiring in Six months has an exercise price of $1.00...
A call option on the euro expiring in Six months has an exercise price of $1.00 and is priced at $ 0.0385. Construct a simple long position in the call. determine the profit from the following basic foreign currency option transactions for each of the following spot rates at expiration: $0.90, $0.95, $1.00, $1.05, and $1.10. Construct a profit graph. Find the breakeven spot rate at expiration. Assume that each contract covers 100,000 euros. (Show answers in Excel if possible)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT