1. Assume an American call option on euros is written with a strike price of $0.96/EUR at a premium of 0.70 cents per EUR and with an expiration date three months from now. The option is for EUR 500,000. Calculate your profit or loss should you exercise the option before maturity at a time when the euro is traded spot at:

a) $0.96/EUR

b) $1.42/EUR

c) $0.78/EUR

2.

Suppose you expect that Singapore dollar will appreciate versus the US$ in the coming 60 days. The current spot rate is $0.70/S$. You expect an appreciation to $0.90/S$. The following options are available to you:

Option	Strike Price	Premium
Put on S$	$0.78/S$	$0.012/S$
Call on S$	$0.78/S$	$0.038/S$

What option would you buy?

What is the gross and net profit (i.e. accounting for the premium) if the spot rate at the end of 60 days is $1.24/S$?

What is the gross and net profit (i.e. accounting for the premium) if the spot rate at the end of 60 days is $1.45/S$?