Unformatted text preview: U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $0.6000/S$. After considerable study, he has concluded that the Singapore dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $0.7000/S$. He has the following optons on the Singapore dollar to choose from: Since Samuel expects the Singapore dollar to appreciate versus the US dollar, he should buy a call on Singapore dollars. This gives him the right to BUY Singapore dollars at a future date at $0.65 each, and then immediately resell them in the open market at $0.70 each for a profit. (If his expectation of the future spot rate proves correct.) c) Using your answer to part (a), what is Samuel's gross profit and net profit (including premium) if the spot rate at the end of 90 days is indeed $0.70/S$? d) Using your answer to part (a), what is Samuel's gross profit and net profit (including premium) if the spot rate at the end of 90 days is $0.80/S$?...
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- Spring '11
- Spot rate, United States dollar, dollar, ISO 4217, Singapore dollar, Samuel Samosir