5. XYZ plc has been offered the following quotes for options on the dollar given a current market price of 60 pence: Strike price of dollar in pence Call premium Put premium 1 year 1 year 62 6.9 3.0 64 5.9 3.8 66 4.8 4.5 67 4.5 5.1

a. Calculate the net payout from a purchased call option at a strike price of 67 pence for the following possible maturity prices 55p, 60p,65p,70p,75p. (6 marks)

b. Calculate the net payout for a written put option at 66p for the following possible maturity prices: 55p, 60p,65p,70p,75p. (6 marks) a. Calculate the total cost of the dollar if the MNC were to implement part a and part b of this question for the following maturity prices: 55p, 60p,65p,70p,75p . (6 marks) b. Outline the advantages and disadvantages of purchasing a call at 67p and writing a put at 66p for a MNC importing from the US. (7 marks)