d. Jennifer Reynolds is a currency speculator. After reading some articles on the subject, she has noticed recently that the Swiss Franc has appreciated substantially against the U.S. dollar. The current exchange rate of the Swiss Franc is $1.15. Most forecasters expect that the Swiss Franc will depreciate against the dollar in the near future, Jennifer, however, feels there is also a good possibility of further appreciation and believes that the Swiss Franc will continue to fluctuate substantially in the near future. A call option on Swiss Franc is available with an exercise price of $1.17 and a premium of $.04. A Swiss Franc put option with an exercise price of $1.17 and a premium of $.03 is also available. i. Describe how Jennifer could speculate on the Swiss Franc's value if she would want to purchase 62,500 units. (2 marks) ii. At option expiration, the value of the Swiss Franc is $1.30. What Jennifer's total profit or loss from a long straddle position? (5 marks) iii. What is Jennifer's total profit or loss from a long straddle position if the value of the Swiss Franc is $1.05 at option expiration? (5 marks) iv. What is Jennifer's total profit or loss from a long straddle position if the value of the Swiss Franc at option expiration is still $1.15 ? (5 marks) v. Given your answers to the questions (ii) through (iv), when is it advantageous for a speculator to engage in a long straddle? When is it advantageous to engage in a short straddle? (3 marks) d. Jennifer Reynolds is a currency speculator. After reading some articles on the subject, she has noticed recently that the Swiss Franc has appreciated substantially against the U.S. dollar. The current exchange rate of the Swiss Franc is $1.15. Most forecasters expect that the Swiss Franc will depreciate against the dollar in the near future, Jennifer, however, feels there is also a good possibility of further appreciation and believes that the Swiss Franc will continue to fluctuate substantially in the near future. A call option on Swiss Franc is available with an exercise price of $1.17 and a premium of $.04. A Swiss Franc put option with an exercise price of $1.17 and a premium of $.03 is also available. i. Describe how Jennifer could speculate on the Swiss Franc's value if she would want to purchase 62,500 units. (2 marks) ii. At option expiration, the value of the Swiss Franc is $1.30. What Jennifer's total profit or loss from a long straddle position? (5 marks) iii. What is Jennifer's total profit or loss from a long straddle position if the value of the Swiss Franc is $1.05 at option expiration? (5 marks) iv. What is Jennifer's total profit or loss from a long straddle position if the value of the Swiss Franc at option expiration is still $1.15 ? (5 marks) v. Given your answers to the questions (ii) through (iv), when is it advantageous for a speculator to engage in a long straddle? When is it advantageous to engage in a short straddle
