6. You are worried about the current economic situation in Europe. Several countries are having debt problems that could affect the value of the Euro. You have no idea what will happen to the value of the currency so you want to use options to take advantage of this uncertainty. Use the information below to construct an appropriate strategy. Carefully explain the strategy and when it would be appropriate to use such a strategy. (15 points) Put and call options are available for Euros with the following information. Call option Premium on Euros = 0.03 USD per Euro Put Option Premium on Euros = 0.02 USD per Euro Strike prices available on Euros for both puts and calls are 1.30 USD = 1 Euro. Complete the table below: Draw a graph.

1 1.05 1.15 1.25 1.3 1.35 1.45 1.55

Spot Rate of Euro at time t