1. Biogen expects to receive royalty payments totaling 1.25 million next month. It is interested in protecting these receipts against a drop in the value of the pound. It can sell 30day pound futures at a price of $1.6513 per pound or it can buy pound put options with a strike price of $1.6612 at a premium of 2.0 cents per pound. The spot price of the pound is currently $1.6560, and the pound is expected to trade in the range of $1.6250 to $1.7010. Biogen's treasurer believes that the most likely price of the pound in 30 days will be $1.6400.
   1. Calculate Biogens gain or loss for both the futures and the option for the following spot prices at expiration (per pound rather than per contract)
      1. 1.625
      2. 1.64
      3. 1.6513
      4. 1.6612
      5. 1.7010
   2. Diagram Biogens profit and loss profile for spot prices between $1.61 and $1.71
   3. What is Biogens break-even future spot price on the option contract? On the futures contract?