1. Apple Corporation must pay its Japanese supplier 125 million yen in three months. It is thinking of buying 20-yen call options (contract size is 6.25 million yen) at a strike price of $0.00800 in order to protect against the risk of rising yen. The premium is 0.015 cents per yen. The current spot rate is I yen = $0.007823.

1. Calculate what Apple would gain or lose on the option position if yen settled in 90 days as low as $0.007500, or as most likely as $0.007900, or as high as $0.008400.
2. What is Apples break-even future spot price on the option contract?