2. You expect a currency to depreciate with respect to the US dollar. The currency is currently trading at a price of $0.75. You decide to go long one put option on the currency with an exercise price of $0.85 and selling at $0.15, and go short one put option on the currency with an exercise price of $0.70 and selling at $0.03. Both the puts expire in three months.

A. What is the term commonly used for the position that you have taken?

B. Determine the value at expiration and the profit for your strategy under the following outcomes:

i. The price of the currency at expiration is $0.87.

ii. The price of the currency at expiration is $0.78.

iii. The price of the currency at expiration is $0.68.

C. Determine the following:

i. the maximum profit.

ii. the maximum loss.

D. Determine the breakeven underlying price at the expiration of the put options.

E. Verify that your answer to Part D above is correct.