Question
* An importer needs to make a payment pf Euros 70,000 in 60 days. The importer's Finance Manager purchase a Call of Option to purchase
* An importer needs to make a payment pf Euros 70,000 in 60 days. The importer's Finance Manager purchase a Call of Option to purchase the Euros in 60 days. Suppose the following facts:
Cnotract Size= Euros 70,000
Exercise Price= $1.50 per Euro
Option Premium $0.03 perEuro
Experiation Date 60 days
a) Calculate the profit (loss) when the spot rate in 60 days is $1.55/euro; $1.45/euro; $1.50/euro. Show all your work with Formulas.
b)Calculate the profit (loss) when the spot rate in 60 days is $1.53. Would the call option be IN or OUT of the Money at $1.53/euro? and why?
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