Baradan Kuppusamy works as a currency speculator for Valdor Capital headquartered in Kuala Lumpur. His most recent speculative position is to profit from his expectation that the Thai baht (B) will rise significantly against the Malaysian ringgit (RM). The current spot rate is RM0.1382 = B1.00. He must choose between the following 90-day options on the Malaysian ringgit:

a. Should Baradan buy a put on Malaysian ringgit or a call on Malaysian ringgit?

b. What is Baradan’s break-even price on the option purchased in part (a)?

c. Using your answer from part (a), what are Baradan’s gross profit and net profit (including premium) if the spot rate at the end of 90 days is RM0.2000 = B1.00?

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Option Strike Price Premium Put on Malaysian ringgit RM0.1600 $0.005 Call on Malaysian ringgit RM0.1600 $0.0025