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 rise significantly against the Japanese yen. The current spot rate is

121.00/$.

She must choose between the following

90-day

options on the Japanese yen:

LOADING...

.

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

140.00/$?

a. Should Cachita buy a put on yen or a call on yen?(Select the best choice below.)

A.

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

B.

Cachita should buy a call on yen to profit from the rise of the dollar (the fall of the yen).

C.

Cachita should buy a call on yen to profit from the fall of the dollar (the rise of the yen).

D.

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

b. What is Cachita's breakeven price on the option purchased in part

a?

Cachita's breakeven price on her option choice is

$enter your response here/.

(Enter as US dollars and round to five decimal places.)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

140.00/$?

Cachita's gross profit, if the ending spot rate is

140.00/$,

is

$enter your response here/.

(Enter as US dollars and round to five decimal places.)Cachita's net profit, if the ending spot rate is

140.00/$,

is

$enter your response here/.

(Enter as US dollars and round to five decimal places.)

Option	Strike Price	Premium
Put on yen	126/$	$0.00003/
Call on yen	126/$	$0.00046/