1 A call option on US dollars with a strike price of

£0.60 is purchased by a speculator for a premium of

£0.06 per unit. Assume there are 50 000 units in this option contract. If the US dollar’s spot rate is £0.65 at the time the option is exercised, what is the net profit or loss per unit to the speculator if the option were to be exercised now? What is the net profit or loss for one contract? What would the spot rate need to be at the time the option is exercised for the speculator to break even? What is the net profit per unit to the seller of this option if exercised now?