A speculator is considering the purchase of one three-month put option on USD with an exercise price of 0.8333 euro per USD. The premium is 0.0234 euro. The current spot price is 0.8493 euro per USD and the 90-day forward rate is 0.8453 euro per USD. The speculator believes the U.S. dollar will depreciate against the Euro to 0.8000 euro per USD over the next three months. As the speculators assistant, you have been asked to prepare the followings:

1. Graph the profit/loss diagram of the put option in an Excel spreadsheet.

2. Determine the speculators profit if the USD depreciates to 0.8000 euro per USD.

3. Determine the speculators profit/loss if the USD depreciates only to the forward rate.

4. Determine the future spot price at which the speculator will only break even.

To draw the profit/loss diagram of a put option for Part 1, you will create a few rows with these headers: spot rate (0.xxxx per USD), exercise price (0.8333 per USD), payoff for the put option, put premium (0.0234), and profit/loss for the put option in Excel. After creating these headers, you will also create a few spot rates below and above the exercise price (0.8333 per USD). To calculate the payoff for the put option in Excel, you can use the max function: =max(Exercise price - Spot rate, 0). The profit/loss for the long put is to subtract the put premium from the payoffs. Then highlighting the data points of profit/loss in the spreadsheet and choosing 2-D Line from Insert tab, you will create the profit/loss diagram for the put option. Certainly, you will format data points on the horizontal axis to the corresponding spot rates. To do this, right click on horizontal axis, choose Select data, and edit horizontal axis labels. The currency unit on the vertical and horizontal axes is the Euro. You should also add a chart title. For Parts 2 to 3, please show your calculations in Excel, which can be done in Part 1 if you have included these values in the spot rate.