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An investor is expecting that the euro either will sharply increase or sharply decrease against the Japanese Yen. The investor purchases 2 options 1) a
An investor is expecting that the euro either will sharply increase or sharply decrease against the Japanese Yen. The investor purchases 2 options 1) a currency put option on the euro with a strike price (exchange rate) of 126/. When the investor purchases the contract, the spot rate of the euro is equivalent to 126/. the premium is 4/ 2) a currency call option on the euro with a strike price (exchange rate) of 126/. When the investor purchases the contract, the spot rate of the euro is equivalent to 126/. the premium is 3/ a) Assume the euro's spot price at the expiration date (market price) is 139/ The investor's profit = / b) Assume the euro's spot price at the expiration date (market price) is 116/ The investor's profit = / c) What is the maximum loss Maximum loss =
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