Cachita Haynes works as a currency speculator for Valtic Capital of Los Angeles. Her latest speculative position is to profit from her expectation that the U.S. dollar will rise significantly against the Japanese yen. The current spot rate is 120.00/$. She must choose between the following 90-day options on the Japanese yen:

Option	Strike Price	Premium
Put on yen	/$ 125	$/ 0.00003
Call on yen	/$ 125	$/ 0.00046

a) Should Cachita buy a put on yen or a call on yen?

ANSWER: Cachita should buy a put on yen to profit from the rise of the dollar (the fall of the yen)

c) Using your answer from part (a), what is Cachita's gross profit if the spot rate at the end of 90 days is 140.00/$ and she buys a contract of size 1,000,000? (Enter as U.S. dollars and round to two decimal places)

d) Using your answer from part (a), what is Cachita's net profit (including premium) if the spot rate at the end of 90 days is 140.00/$ assuming she buys a contract of size 1,000,000? (Enter as U.S. dollars and round to two decimal places)