6. The following uses the market data in Lecture 4 Part II slide 10. Focus on the following option: Buy one Call 58.5 Aug (US cents/SF).

Given the following terminal spot prices (stated in U.S. cents per Swiss franc.): 56, 57.35, 58.64, 59.6, and 60,

a. Compute the dollar payoff at maturity for each terminal spot price for the option buyer.

b. Compute total profit / loss (that is, payoff plus the premium) for each terminal spot price for the option buyer.

c. How would your answer to the previous sections be different for the option seller (aka the option writer)?

Hint - the following solves for terminal spot price 60.

Payoff at maturity at S=60: Max[60 - 58.5, 0] x 62,500 100 = $937.5.

Total Profit / Loss at S=60: [Max[60 - 58.5, 0] - 0.5] x 62,500 100 = $625.