Assume that the exercise price is $1.40/ and theputpremium is $0.10/. Answer the following questions.[Hint: Please answer the following questions in term of the holder (Purchaser) of aput option]

1. (5 points) What are the future spot rates for in the money and out of the money?

1. (5 points) What is the spot rate for the breakeven point (zero net profit) for this option?

1. (8 points) Find the net profit (per unit of currency) for thebuyerof this put option when the spot rates are $1.25/, $1.35/, $1.45/, and $1.55/.

Spot Rate	Net Profit (Loss) per unit if Spot Rate Occurs
$1.25/
$1.35/
$1.45/
$1.55/

1. (2points)Whatwouldbethemaximumpossiblelossforabuyerofthisputoption(perunit)andexplainwhy?

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