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 pound 250 comma 000250,000 each, wish to speculate on the movement of currencies. The investors expect annual returns in excess of 2525%. Although officed in London, all accounts and expectations are based in U.S. dollars. Arthur is convinced that the British pound will slide significantlylong dashpossibly to $ 1.3200 divided by pound$1.3200/long dashin the coming 30 to 60 days. The current spot rate is $ 1.4265 divided by pound$1.4265/. Arthur wishes to buy a put on pounds which will yield the 2525% 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. 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 $ 0.00332 / $ 1.34 / 60 days $ 0.00151 / $ 1.32 / 60 days $ 0.00063 /

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

30

60

90

-day options to be sure and capture the timing of the exchange rate change. (Select from the drop-down menu.)

The return on investment (ROI) at the strike price of

$1.361.36/pound

is

nothing%.

(Round to the nearest integer.)

The return on investment (ROI) at the strike price of

$1.341.34/pound

is

nothing%.

(Round to the nearest integer.)

The return on investment (ROI) at the strike price of

$1.321.32/pound

is

nothing%.

(Round to the nearest integer.)

Arthur should purchase the 60-day option at strike price $

1.36

1.34

1.32

/pound. (Select from the drop-down menu.)