Cachita Haynes works as a currency speculator for Vatic Capital of Los Angeles, Her latest speculative position is to profit from her expectation that the U.S. dollar will fall significantly against the Japanese yen. The current spot rate is Yen 140.00/$. She must choose between the following 90-day options on the Japanese yen:

Option	Strike Price	Premium
Put on yen	130 yen/$	$0.00003/yen
Call on yen	130 yen/$	$0.00046/yen

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

b. What is Cachita's breakeven price on the option purchased in part (a)?

c. Using your answer from part (a), what is Cachita's gross profit and net profit (including premium) if the spot rate at the end of 90 days is Yen 120/$?

d. Draw her payoff chart, including the option premium, using spot rates and strike price on the x-axis and option payoffs on the y-axis. Make sure to. include values for breakeven price, strike price and net profit from part c in the chart.