1. Currency speculation: you are given following information

Lending rate for $ is 8.0% and for peso is 8.5%

Borrowing rate for $ is 8.3% and for peso is 8.7%

Peso tends to appreciate against US$ from $.15 to $.17 in 30 days

Your borrowing capacity is $10 million or 70 million pesos.

a. What is the interest rate on your loan?

b. After currency conversion, how much should be deposited or lent?

c. After 30 days, how much is the expected cash inflow?

d. After 30 days, how much is the expected cash outflow?

e. After 30 days, how much is the expected profit?

2. Premium paid, P, to get the call is $0.02 per unit, Strike price, X, is $1.45; Spot price, S, is $1.46 when the call is exercised; the size of the call is 31,250 units. What is the net profit for the buyer of call option?

3. Premium paid, P, to get the put is $0.04 per unit, Strike price, X, is $1.80; Spot price, S, is $1.59 when the put is exercised; the size of the put is 31,250 units. What is the net profit for the buyer of put option?

4. Premium received from sale of the call is $0.01, X = $0.76, S = $$0.82. The size of the call is 50,000 units. What is the net profit for the seller of call option?

5. Premium received from sale of the put is $0.03, X = $0.75, S = $$0.72. The size of the put is 50,000 units. What is the net profit for the seller of put option?