help explain steps please
Q1 to Q8 Sally works for a corporate that needs to sell 10 mio EUR and buy Norweglan Krona (NOK) for delivery exactly three months from now (now is today, time zero). The current spot rate (expressed as number of NOK per EUR) is being quoted by a bank as 5.21005.2110 (bid - ask). The current forward rate (expressed as number of NOK per EUR) for delivery in 3 months is being quoted by a bank as 0.2450 - 5.2460 (bid - ask) There is a put option with strike 5.24 (ie. 5.24 NOK per EUR) whose price today is 0.06 NOK per EUR available to trade in the market. There is a call option with strike 5.24 (i. .5 .524 NOK per EUR) whose price today is 0.0675 NOK per EUR available to trade in the market. Suppose that the spot exchange rate in 3 months from now is S_{3m}, how many NOK can Sally's company buy Try values of S{3m}={5.2000,5.2100,5.2400,5.2450,5.2500,5.3000,55000} The questions ask you to consider using an option OR using a forward contract. Sally must sell the 10 mio EUR three months from now and buy as many NOK as possible so her company can pay the staff and rent costs of their operations in Norway In the questions where we assume Sally uses options, you neglect the time value of money associated with the Q1: If Sally uses a forward contract, how many NOK can Sally buy? In the rest of the questions, assume Sally uses options (and NOT a forward). As a hint, all of the questions Q1 to Q8 have answers that are between 50 mio NOK and 60 mio NOK so if you get something else, check your answers Q2. If Sally uses options, and S_\{3m\} turs out to be 5.2000 NOK per EUR, how many NOK can Sally buy (AFTER allowing for the option premium (but neglect the time value of money))? Q3. If Sally uses options, and S{3m} turns out to be 5.2100 NOK per EUR, how many NOK can Sally buy (AFTER allowing for the option premium (but neglect the time value of money))? Q4 If Sally uses options, and S{3m} turns out to be 5.2400 NOK per EUR, how many NOK can Sally buy (AFTER allowing for the option premium (but neglect the time value of money))? Q5. If Sally uses options, and S {3m} turns out to be 52450 NOK per EUR, how many NOK can Sally buy (AFTER allowing for the option premium (but neglect the time value of money))? Q6. If Sally uses options, and S_ {3m} turns out to be 52500 NOK per EUR, how many NOK can Sally buy (AFTER allowing for the option premium (but neglect the time value of money))? Q7 If Sally uses options, and S_\{ 3m} turns out to be 5.3000 NOK per EUR, how many NOK can Sally buy (AFTER aliowing for the option premium (but neglect the time value of money))? Q8 If Sally uses options, and S_[3m\} turns out to be 55000 NOK per EUR, how many NOK can Sally buy (AFTER allowing for the option premium (but neglect the time value of money))
