1. Barry Egan is a currency speculator. Barry believes that the Japanese yen will fluctuate widely against the U.S. dollar in the coming month. Currently, 1-month call options on Japanese yen () are available with a strike price of $.0086 and a premium of $.0008 per unit. One-month put options on Japanese yen are available with a strike price of $.0085 and a premium of $.0006 per unit. One option contract on Japanese yen contains 6.5 million.

a. Describe how Barry Egan could utilize these options to speculate on the movement of the Japanese yen.

b. What are the break-even points of his strategy, please show in the graph?

c. What is Barrys total profit or loss if the value of the yen in 1 month is $.0070?

d. What is Barrys total profit or loss if the value of the yen in 1 month is $.0090?