Arthur Doyle at Baker Street. Arthur Doyle is a currency trader for Baker Street, a private investment house in London. Baker Street's clients are a collection of wealthy private investors who, with a minimum stake of 220,000 each, wish to speculate on the movement of currencies. The investors expect annual returns in excess of 25 %. Although officed in London, all accounts and expectations are based in U.S. dollars. Arthur is convinced that the British pound will slide significantlypossibly

to $1.3200/in the coming 30 to 60 days. The current spot rate is$1.4265/.

Arthur wishes to buy a put on pounds which will yield the 25 % return expected by his investors. Which of the following put options would you recommend he purchase? Prove your choice is the preferable combination of strike price, maturity, and up-front premium expense.

Because his expectation is for "30 to 60 days" he should confine his choices to the

? day options to be sure and capture the timing of the exchange rate change.

The return on investment (ROI) at the strike price of $1.36 /pound is ?%.

(Round to the nearest integer.)

The return on investment (ROI) at the strike price of $1.34 /pound is ? %.

(Round to the nearest integer.)

The return on investment (ROI) at the strike price of $1.32 /pound is ? (Round to the nearest integer.)

Arthur should purchase the 60-day option at strike price

$?/pound.

Strike Price			Maturity	Premium
$	1.36	/	30 days	$	0.00081	/
$	1.34	/	30 days	$	0.00021	/
$	1.32	/	30 days	$	0.00004	/
$	1.36	/	60 days	$	0.00333	/
$	1.34	/	60 days	$	0.00151	/
$	1.32	/	60 days	$	0.00061	/