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Assume the August call and put option on Swiss francs have the same strike price of 58½ ($0.5850/...

Assume the August call and put option on Swiss francs have the same strike price of 58½ ($0.5850/SF), and premium of $0.005/SF. In what price range the purchase of the PUT option would choose to exercise the option?

a. at all spot rates above the strike price of 58.5

b. at the strike price of 58.5

c. at all spot rates below the strikes of 58.5

d. at all spot rates below the 59

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Answer #1

Breakeven rate=0.585-0.005=0.580
So one would choose to exercise the PUT option
c. at all spot rates below the strikes of 58.5

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