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A speculator believes that the Euro will depreciate relative to $. The speculator should a) Sell a put on E b) buy a put on
A speculator believes that the Euro will depreciate relative to $. The speculator should a) Sell a put on E b) buy a put on E c) buy a call on E d) buy a future on E e) sell a future on E and sell a call on $. 7) One Year forward rate is $1.7300/pound. Consider call and put options (on pound) defined as below: Maturity-One Year. Strike Price- $1.7300/pound. Premium on call is 4 cents(US) per pound. This means that, to avoid arbitrage, the premium on put must be: a) more than 4 cents per pound b) 4 cents per pound c) less than 4 cents per pound d) need more data 8) A German speculator wants to speculate using forward contracts. She has bought the E forward against the Peso. She will be happy (make money in E on this contract) if: a) The Peso gets weaker relative to the contract price. b) The Peso gets stronger relative to the contract price. c) none of the above, because she has 'locked in' a fixed rate
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