Currency options. What are the two types, and what is the difference between them? What is the break-even point for each type? Conceptually understand and be able to mathematically work with them.

A. You purchase a put option on the Canadian dollar with a strike price of $0.91 and a premium of $0.02. If before expiration the spot rate of the Canadian dollar is $0.92, will you exercise the option?

b. What if the spot rate before expiration is $0.88?

c. What is the break-even spot rate?

d. If a firm bought this option to hedge a C$100,000 receivable and exercised it when the spot rate is $0.875, how many U.S. dollars would the firm receive?