Question
An investor is bullish on the euro and believes it will increase against the Japanese Yen. The investor purchases a currency call option on the
An investor is bullish on the euro and believes it will increase against the Japanese Yen. The investor purchases a currency call option on the euro with a strike price (exchange rate) of 124/. When the investor purchases the contract, the spot rate of the euro is equivalent to 125/. Assume the euro's spot price at the expiration date (market price) is 133/. the premium is 3/ a) Assume the euro's spot price at the expiration date (market price) is 133/ The investor's profit = / b) Assume the euro's spot price at the expiration date (market price) is 122/ The investor's profit = / c) What is the maximum loss Maximum loss = /
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