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Assume a call option contract on Australian dollars is available with an exercise price of $ . 8 7 per australian dollars and a contract
Assume a call option contract on Australian dollars is available with an exercise price of $ per australian dollars and a contract size
of AUD This is a European option, and the premium is $ per australian dollars.
Required:
a If you take a long position on this contract, at what future spot exchange rate at maturity will you maximize your profit? What is the
amount of the maximum possible profit from one contract?
b What is the maximum possible loss for a buyer of this call option?
c What is the maximum possible profit from this contract to a call option writer?
d What is the maximum possible loss for a call writer?
e At what future spot exchange rate, will the call buyer and writer break even?
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