Homework Answers
Q - 16
You will exercise the option if Stock price > K = Exercise Price
Hence the correct answer is the third option.
Q - 17
The transaction is being accelerated. This is an example of Lead Strategy.
Hence, the correct answer is the last option: a lead strategy
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QUESTION 16 Suppose you enter into a call option, because you are making a bid for...
QUESTION 14 You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is...
QUESTION 14 You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.00 - €1.00 and the dollar-pound exchange rate is quoted at $1.80 - 21.00. If a bank quotes you a cross rate of £1.00 - €1.50, how much money can an astute trader make? No arbitrage is possible. $1,160,000 $200,000 $250,000 Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Answers Save and...
BF2207 Question 2 Suppose that, six months ago, you sold a call option on 1,000,000 euros...
BF2207 Question 2 Suppose that, six months ago, you sold a call option on 1,000,000 euros (EUR) with an expiration date of six months and an exercise price of 1.1780 United States dollars (USD). You received a premium on the call option of 0.045 USD per unit. Assume the following: • Money market interest rates for EUR are constant through time and equal 5% for all maturities. • Money market interest rates for USD are constant through time and equal...
Consider a European call option on €62,500 with an exercise price of $1.50/€. You pay an...
Consider a European call option on €62,500 with an exercise price of $1.50/€. You pay an option premium of $0.10/€ for the call option today. a. If the $-€ spot exchange rate is $1.62/€ on the contract expiration date, would you exercise the call option (buy € at the exercise price at expiration)? What would be the option payoff and profit? b. If the $-€ spot exchange rate is $1.45/€ on the contract expiration date, would you exercise the call...
Question 1 ol s 2 Points You bought British pound call option at a premium of...
Question 1 ol s 2 Points You bought British pound call option at a premium of $0.11 per unit. The exercise price is $1.73. In three months (right before your option expires), you can buy British pounds for $1.53 per unit in the spot market. What will be your net profit? A. -$0.11 B. $0 OC. $0.09 D. $0.20
last box's option to choose from are (Delivery, Currency Depreciation, or Inflation) Problem 15-02 You are...
last box's option to choose from are (Delivery, Currency
Depreciation, or Inflation)
Problem 15-02 You are a coffee dealer anticipating the purchase of 87,000 pounds of coffee in three months. You are concerned that the price of coffee will rise, so you take a long position in coffee futures. Each contract covers 39,500 pounds, and so, rounding to the nearest contract, you decide to go long in two contracts. The futures price at the time you initiate your hedge is...
QUESTION 2 You have purchased a call option contract on Johnson & Johnson common stock. The...
QUESTION 2 You have purchased a call option contract on Johnson & Johnson common stock. The option has an exercise price of $89.00 and J&J's stock currently trades at $90.43. The option premium is quoted at $2.17 per contract. a) Calculate your net profit on the option contract if I & J's stock price rises to $94.00 and you exercise the option. b) Calculate your net profit on the option contract if J & J's stock price falls to $89.50...
QUESTION 21 Assume that the yen/dollar exchange rate quoted in London at 3:00 p.m. is V115...
QUESTION 21 Assume that the yen/dollar exchange rate quoted in London at 3:00 p.m. is V115 $1. Rinaldo finds out that the rate quoted in New York at 10:00 a.m. (3:00 p.m. London time) is V135 = $1. Rinaldo decides to buy yen in New York and sell it in London. Rinaldo is engaging in currency swapping. currency speculation carry trade. arbitrage. 1 points Save Answer QUESTION 22 Assume you are an Israeli investor, the symbol for the Israeli currency,...
Assume you buy a call option for £31,250 with a strike price of $1.330/f and a...
Assume you buy a call option for £31,250 with a strike price of $1.330/f and a premium of $.0OSVE Assume you buy a put option for £31,250 with a strike price of S1.310/s and a premium of s.ovE. 1. Turn in a spreadsheet (Use Excel) (50 points) Examine the payoffs from possible ending spot rates of $1.270/E to $1.370/E with increments of $.005. (i.e, 1.270, 1.275, 1.280,.... ..365, 1.370) Build a spreadsheet exactly as we did in class to show...
Use the following information to answer Q5, Q6 and Q7. You are the CFO at a...
Use the following information to answer Q5, Q6 and Q7. You are the CFO at a U.S. exporter. It is now June and in December you will receive EUR750,000 from your European customer which you must immediately convert into USD. The spot EUR/USD exchange rate is 1.4524. You would like to hedge your exchange rate risk using the Chicago Mercantile Exchange December EUR/USD futures contract. The notional amount for the futures contract is EUR125,000. The interest rate in the U.S....
1. Consider a call option selling for $ 4 in which the exercise price is $50....
1. Consider a call option selling for $ 4 in which the exercise price is $50. A) Determine the value at expiration and the profit for a buyer under the following outcomes: i. The price of the underlying at expiration is $55 ii. The price of the underlying at expiration is $51 iii. The price of the underlying at expiration is $48 B) Determine the value at expiration and the profit for a seller under the following outcomes: i. The...
QUESTION 14 You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.00 - €1.00 and the dollar-pound exchange rate is quoted at $1.80 - 21.00. If a bank quotes you a cross rate of £1.00 - €1.50, how much money can an astute trader make? No arbitrage is possible. $1,160,000 $200,000 $250,000 Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Answers Save and...
BF2207 Question 2 Suppose that, six months ago, you sold a call option on 1,000,000 euros (EUR) with an expiration date of six months and an exercise price of 1.1780 United States dollars (USD). You received a premium on the call option of 0.045 USD per unit. Assume the following: • Money market interest rates for EUR are constant through time and equal 5% for all maturities. • Money market interest rates for USD are constant through time and equal...
Question 1 ol s 2 Points You bought British pound call option at a premium of $0.11 per unit. The exercise price is $1.73. In three months (right before your option expires), you can buy British pounds for $1.53 per unit in the spot market. What will be your net profit? A. -$0.11 B. $0 OC. $0.09 D. $0.20
last box's option to choose from are (Delivery, Currency
Depreciation, or Inflation)
Problem 15-02 You are a coffee dealer anticipating the purchase of 87,000 pounds of coffee in three months. You are concerned that the price of coffee will rise, so you take a long position in coffee futures. Each contract covers 39,500 pounds, and so, rounding to the nearest contract, you decide to go long in two contracts. The futures price at the time you initiate your hedge is...
QUESTION 2 You have purchased a call option contract on Johnson & Johnson common stock. The option has an exercise price of $89.00 and J&J's stock currently trades at $90.43. The option premium is quoted at $2.17 per contract. a) Calculate your net profit on the option contract if I & J's stock price rises to $94.00 and you exercise the option. b) Calculate your net profit on the option contract if J & J's stock price falls to $89.50...
QUESTION 21 Assume that the yen/dollar exchange rate quoted in London at 3:00 p.m. is V115 $1. Rinaldo finds out that the rate quoted in New York at 10:00 a.m. (3:00 p.m. London time) is V135 = $1. Rinaldo decides to buy yen in New York and sell it in London. Rinaldo is engaging in currency swapping. currency speculation carry trade. arbitrage. 1 points Save Answer QUESTION 22 Assume you are an Israeli investor, the symbol for the Israeli currency,...
Assume you buy a call option for £31,250 with a strike price of $1.330/f and a premium of $.0OSVE Assume you buy a put option for £31,250 with a strike price of S1.310/s and a premium of s.ovE. 1. Turn in a spreadsheet (Use Excel) (50 points) Examine the payoffs from possible ending spot rates of $1.270/E to $1.370/E with increments of $.005. (i.e, 1.270, 1.275, 1.280,.... ..365, 1.370) Build a spreadsheet exactly as we did in class to show...
Use the following information to answer Q5, Q6 and Q7. You are the CFO at a U.S. exporter. It is now June and in December you will receive EUR750,000 from your European customer which you must immediately convert into USD. The spot EUR/USD exchange rate is 1.4524. You would like to hedge your exchange rate risk using the Chicago Mercantile Exchange December EUR/USD futures contract. The notional amount for the futures contract is EUR125,000. The interest rate in the U.S....
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