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An investor is bearish on the euro and believes it will decrease against the Japanese Yen. The investor purchases a currency put option on the
An investor is bearish on the euro and believes it will decrease against the Japanese Yen. The investor purchases a currency put option on the euro with a strike price (exchange rate) of 134/. When the investor purchases the contract, the spot rate of the euro is equivalent to 134/C. the premium is 2/ a) Assume the euro's spot price at the expiration date (market price) is 123/ The investor's profit = / b) Assume the euro's spot price at the expiration date (market price) is 137/C The investor's profit = =/C c) What is the maximum loss Maximum loss = W/C d) What the maximum profit Maximum profit =/C
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