3. Today is the expiration day of a put option on the euro that you purchased two weeks ago when the spot rate was $1.0860/. The strike rate on the option is $1.0840/ and the premium was $0.0380/.

a. What were the intrinsic value and the time value of the put at the time of purchase?

b. If todays spot rate is $1.0980/, would you exercise? Explain why. Prove your point by calculating your payoff (payoff is value of option at expiration)? How much would your profit/loss be? (Please answer questions in the order given).

c. Repeat part b above assuming todays spot rate is $1.0720/.

d. At what expiration spot rate would you break-even?