1)Currentlytheexchangerateis30pesoperonedollar.Theanalystsarepredictingthatthepesomaydevalueby20%.Whatwouldbethenewexchangerateifthesaidpesodevaluationoccurs?

2) If thus the case than it will go down to 6 peso because 20% of 30 is 6.

Citigroup sells a call option on euros (contract size is 500,000) at a premium of $0.04 per euro. If the exercise price is $1.34 and the spot price of the euro at expiration is $1.36, what is Citigroups profit (loss) on the call option?

Since the spot price of $1.36 exceeds the exercise price of $1.34, Citigroup's counterparty will exercise its call option, causing Citigroup to lose 2 per euro. Adding in the 4 call premium it received gives Citigroup a net profit of 2 per euro on the call option for a total gain of .02 x 500,000 = $10,000. C t

3. Graph the sellers profit or loss for the call option described in #4. What is the break-even spot exchange rate?

4.A pound call that has an exercise price of $1.50 and expires in 2 months has a premium of $0.25 per pound. Assuming the current spot exchange rate of $1.55 per pound, what is the intrinsic value of the pound call? Time value?

5)CDS* What is a credit default swap (CDS)?

6) LIBOR* What is LIBOR and why does it receive so much attention in the global financial markets?