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(Ch. 5) Selling Currency Call Options. Owen Bulsara sold a call option in Australian dollars (AUD) for USD.03 per unit. The strike price was USD
(Ch. 5) Selling Currency Call Options. Owen Bulsara sold a call option in Australian dollars (AUD) for USD.03 per unit. The strike price was USD .74 (the exchange rate we use is AUDUSD), and the spot rate at the time the option was exercised was USD .72. Assume Mr. Bulsara did not obtain AUD until the option was exercised. Also, assume that there are 50,000 units in an AUD option. What was Mr. Bulsara's net profit on the call option? (5 points) (Ch. 5) Selling Currency Put Options. Brian Soto sold a put option on AUD for the premium at USD .06 per unit. The strike price was USD .76 (the exchange rate we use is AUDUSD), and the spot rate at the time the option was exercised was USD .72. Assume Brian immediately sold off the AUD received if the option was exercised. Also, assume that there are 50,000 units in an AUD option. What was Brian's net profit on the put option? (5 points) (Ch. 5) Speculating with Currency Put Options. Queen Co. has purchased AUD options for speculative purposes. Each option was purchased for a premium of USD .02 per unit, with an exercise price of USD .79 per unit. (the exchange rate we use is AUDUSD.) Queen Co. will purchase the AUD just before it exercises the options (if it is feasible to exercise the options). It plans to wait until the expiration date before deciding whether to exercise the options. In the following table, fill in the net profit (or loss) per unit to Queen Co. based on the listed possible spot rates of the AUD on the expiration date. (each row: 3 points with a total of 18 points)
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