Assume the current spot rate is $1.1701/, and U.S. Dollar ($) is the home currency.

A PUT option on Euro () has a strike price of $1.0640/ and a premium of $0.00041/.

i. Determine break-even price for the option.

ii. For a buyer, when the spot rate is $1.0000/, is the option at-the-money, or in-the-money, or out-of-the-money?

iii. Determine net profit or loss for the option for a buyer if the spot rate is $1.0040/.

iv. Assume a U.S. company will purchase the option for hedging a cash flow amounting to 2.5m Account Receivable due in 3 months. The weighted average cost of capital (WACC) of the purchaser is 15% p.a. Determine the company's benefit for using option market hedge.