1. You have a short position on at a price of $1.5/. You also sold a put option on with an option premium of $0.05 a share and an exercise price of $1.48/. What will be your total profit/loss per euro from these two positions if the exchange rate on the expiration date is:

a. $1.34/

b. $1.55/

2. What is the difference between a covered call and a long currency? In other words, why do we do a covered call? What is the advantage of it?

3. Why would anyone do a long synthetic or a short synthetic? What is the difference between a long synthetic and a long currency? What is the difference between a short synthetic and a short currency?

4. You bought a call option on with an exercise price of $2 and you paid $0.05/ as premium. At the same time, you sold a put on with an exercise price of $2 and you received $0.12/ as premium.

a. Please draw the combined profit graph. Show all appropriate numbers.

b. What is the name of this strategy?

c. What is the break-even point?

d. What is your profit/loss if ST = $1.94/?

e. What is your profit/loss if ST = $1.99/?

f. What is your profit/loss if ST = $2.10/?