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Hi, this question has been posted before, but the answers appear a bit different. Can someone potentially clarify for me? Matt works for a currency
Hi, this question has been posted before, but the answers appear a bit different. Can someone potentially clarify for me?
Matt works for a currency trader. He expects that the Australian dollar (AUD) will appreciate versus the U.S. dollar over the coming 90 days. The current spot rate is $0.5750/AUD. Matt has the following options available based on the Australian dollar as shown in Table 6.1: Table 6.1. Australian Dollar Current spot rate (USS/AUD) $0.5750 Days to maturity 90 Option choices on the AUD): Strike price (USS/AUD) Premium (US$/AUD) Call option $0.6000 $0.0149 Put option $0.6000 $0.0004 A. Which option should Matt buy? B. What is Matt's breakeven price on the option purchased? C. What is Matt's gross profit and net profit (including premium) if the ending spot rate is $0.6600/AUD? D. What is Matt's payoff if the spot rate is $0.5550/AUDStep by Step Solution
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