Question
a) You purchase a call option on pounds for a premium of $0.03 per unit, with an exercise price of $1.64; the option will not
a) You purchase a call option on pounds for a premium of $0.03 per unit, with an exercise price of $1.64; the option will not be exercised until the expiration date, if at all. If the spot rate on the expiration date is $1.65, find your net profit per unit (pound).
(b) The existing spot rate of the Canadian dollar is $0.82. The premium on the Canadian dollar put option is $0.04. The exercise price is $0.81. The option will be exercised on the expiration date if at all. Suppose you wrote (i.e. sold) such an option. If the spot rate on the expiration date is $0.87, calculate (i) the profit and (ii) effective sale price of the Canadian dollar at expiration.
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