b$.$ What are the advantages

Question Five

A speculator is considering the purchase of five three$-$month Japanese yen call options with a striking price of $76$ cents per $100$ yen. The premium is $1\mathrm{.}05$ cents per $100$ yen. The spot price is $85\mathrm{.}27$ cents per $100$ yen and the $90-$Day forward rate is ${75\mathrm{.}711}^{95\text{c}\text{e}\text{n}\text{t}\text{s}\text{.}}.$ The speculator believes the yen will appreciate to $$1\mathrm{.}00p=r100$ yen over the next three months. As the speculator's assistant, you have been asked to prepare ti:e following:

a$.$ Graph the call option.

b$.$ Estimate the speculator's profit if the yen appreciates to $$\frac{1\mathrm{.}00}{100}$ yen.

c$.$ Estimate the speculator's profit if the yen only appreciates to the forward rate.

d$.$ Estimate the future spot price at which the speculator will only breakeven