Question

Kiko Peleh's Puts. Kiko Peleh writes a put option on Japanese yen with a strike price...

Kiko Peleh's Puts. Kiko Peleh writes a put option on Japanese yen with a strike price of $ 0.008000/¥ (¥ 125.00/ $) at a premium of 0.0080¢ per yen and with an expiration date six months from now. The option is for ¥12,500,000. What is Kiko's profit or loss at maturity if the ending spot rates are ¥111/$, ¥114/$, ¥120/$, ¥126/$, ¥131/$, ¥136/$,

and ¥141/$.

Kiko's profit or loss at maturity if the ending spot rate is ¥111 /$ is __. (Round to the nearest cent and indicate a loss by using a negative sign.)

Kiko's profit or loss at maturity if the ending spot rate is ¥114/$ is__. (Round to the nearest cent and indicate a loss by using a negative sign.)

Kiko's profit or loss at maturity if the ending spot rate is ¥120/$ is__. (Round to the nearest cent and indicate a loss by using a negative sign.)

Kiko's profit or loss at maturity if the ending spot rate is ¥126 /$ is__. (Round to the nearest cent and indicate a loss by using a negative sign.)

Kiko's profit or loss at maturity if the ending spot rate is ¥131 /$ is__. (Round to the nearest cent and indicate a loss by using a negative sign.)

Kiko's profit or loss at maturity if the ending spot rate is ¥136 /$ is__. (Round to the nearest cent and indicate a loss by using a negative sign.)

Kiko's profit or loss at maturity if the ending spot rate is ¥141 /$ is__.(Round to the nearest cent and indicate a loss by using a negative sign.)

Homework Answers

Answer #1

Profit of a short put option = -max(X - St, 0) + premium received

If the ending spot price is Yen 111/$ or $0.009009009009/Yen

Profit = -max(0.008000 - 0.009009009009, 0) + 0.00008

Profit = -0 + 0.00008 = $0.00008 per yen

Total profit = 0.00008 * 12,500,000 = $1,000

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