4. The premium on a pound call option is $.08 per unit. The exercise price is $1.26. The break-even point is ____ for the buyer of the call option, and ____ for the seller of the call option.

	a.	$1.26; $1.26
	b.	$1.20; $1.18
	c.	$1.34; $1.34
	d.	$1.18;$1.18

1.5 points

QUESTION 5

1. You are a speculator who buys a put option on Canadian dollars for a premium of $.02 per unit, with an exercise price of $.66. The option will not be exercised until the expiration date, if at all. If the spot rate of the Canadian dollar is $.58 on the expiration date, your net profit per unit is:

   	a.	$.06
   	b.	$.08
   	c.	$.08
   	d.	$.03

1.5 points

QUESTION 6

1. A U.S. corporation has purchased currency call options to hedge a 700,000 pound payable. The premium is $.06 and the exercise price of the option is $1.15. If the spot rate at the time of maturity is $1.25, what is the total amount paid by the corporation if it acts rationally?

   	a.	$844,100
   	b.	826,900
   	c.	$847,000
   	d.	$833,600