Assignment-2[1]

# Assignment-2[1] - Session 3, Chapter 5 11. Speculating with...

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Session 3, Chapter 5 11. Speculating with Currency Put Options. Alice Duever purchased a put option on British pounds for \$.04 per unit. The strike price was \$1.80 and the spot rate at the time the pound option was exercised was \$1.59. Assume there are 31,250 units in a British pound option. What was Alice’s net profit on the option? ANSWER: Profit per unit on exercising the option = \$.21 Premium paid per unit = \$.04 Net profit per unit = \$.17 Net profit for one option = 31,250 units × \$.17 = \$5,312.50 19. Speculating with Currency Call Options. LSU Corp. purchased Canadian dollar call options for speculative purposes. If these options are exercised, LSU will immediately sell the Canadian dollars in the spot market. Each option was purchased for a premium of \$.03 per unit, with an exercise price of \$.75. LSU plans to wait until the expiration date before deciding whether to exercise the options. Of course, LSU will exercise the options at that time only if it is feasible to do so. In the following table, fill in the net

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## Assignment-2[1] - Session 3, Chapter 5 11. Speculating with...

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