price of $0.77275 per 10 MXN is greater than your expected spot price of
$0.70500 per 10 MXN
Your anticipated profit from a short position in three contracts would be:
50
.
162
,
10
$
500,000
$0.070500)

($0.077275
3
MXN
6.
Using the market data in Exhibit 7.6, show the net terminal value of a long
position in one 108.5 Sep Japanese yen European call contract at the following
terminal spot prices, cents per yen: 106, 108, 108.5, 110, and 112. Ignore any time
value of money effect.
7.
Using the market data in Exhibit 7.6, show the net terminal value of a long
position in one 108.5 Sep Japanese yen European put contract at the following
terminal spot prices, cents per yen: 106, 108, 108.5, 110, and 112. Ignore any time
value of money effect.
8.
Assume that the Japanese yen is trading at a spot price of 92.04 cents per 100 yen.
Further, assume that the premium of an American call (put) option with a striking
price of 93 is 2.10 (2.20) cents. Calculate the intrinsic value and the time value of
the call and put options.
9.
Assume the spot Swiss franc is $0.70000 and the sixmonth forward rate is
$0.6950. What is the minimum price that a sixmonth American call option with a
striking price of $0.6800 should sell for in a rational market? Assume the
annualized sixmonth Eurodollar rate is 3.5 percent.
10.
Do problem 9 again assuming an American put option instead of a cell option.
11.