HW 6FIN525 International Financial ManagementFall 2015Name I Speculation with Currency Options As a trader, you become bullish on the British pound and decide to speculate with currency options that will mature in December Below are two options available Call option Strike price $1 60 and premium $0 05 Put option Strike price $1 60 and premium $0 04 Please answer the following questions 1 What type of options should you purchase call or put option Please explain 2 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 80 3 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 75 4 Based on your decision in part 1, what is your bet profit loss when the spot rate at maturity is $1 65 5 Based on your decision in part 1, what is your bet profit loss when the spot rate at maturity is $1 55 6 Draw a diagram to illustrate the payoff Make sure to mark down the strike price, the break even point, and the moneyness (in the money, at the money, and out of the money) on the diagram II Speculation with Currency Options As a trader, you become bearish on the British pound and decide to speculate with currency options that will mature in December There are two options available Call option Strike price $1 60 , and premium $0 05 Put option Strike price $1 60 , and premium $0 04 Please answer the following questions 1 What type of options should you purchase call or put option Please explain 2 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 45 3 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 50 4 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 56 5 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 70 6 Draw a diagram to illustrate the payoff Make sure to mark down the strike price, the break even point, and the moneyness (in the money, at the money, and out of the money) on the diagram HW 6 FIN525 International Financial Management Fall 2015 Name I Speculation with Currency Options As a trader, you become bullish on the British pound and decide to speculate with currency options that will mature in December Below are two options available Call option Strike price $1 60 and premium $0 05 Put option Strike price $1 60 and premium $0 04 Please answer the following questions 1 What type of options should you purchase call or put option Please explain 2 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 80 3 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 75 4 Based on your decision in part 1, what is your bet profit loss when the spot rate at maturity is $1 65 5 Based on your decision in part 1, what is your bet profit loss when the spot rate at maturity is $1 55 6 Draw a diagram to illustrate the payoff Make sure to mark down the strike price, the break even point, and the moneyness (in the money, at the money, and out of the money) on the diagram II Speculation with Currency Options As a trader, you become bearish on the British pound and decide to speculate with currency options that will mature in December There are two options available Call option Strike price $1 60 , and premium $0 05 Put option Strike price $1 60 , and premium $0 04 Please answer the following questions 1 What type of options should you purchase call or put option Please explain 2 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 45 3 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 50 4 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 56 5 Based on your decision in part 1, what is your net profit loss when the spot rate at maturity is $1 70 6 Draw a diagram to illustrate the payoff Make sure to mark down the strike price, the break even point, and the moneyness (in the money, at the money, and out of the money) on the diagram

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HW#6FIN525 International Financial ManagementFall/2015Name__________________I. Speculation with Currency Options As a trader, you become bullish on the British pound and decide to speculate with currency options

HW#6FIN525 International Financial ManagementFall/2015Name__________________I. Speculation with Currency Options As a trader, you become bullish on the British pound and decide to speculate with currency options that will mature in December. Below are two options available: Call option: Strike price = $1.60/ and premium = $0.05/ Put option: Strike price = $1.60/ and premium = $0.04/Please answer the following questions:1. What type of options should you purchase: call or put option? Please explain.2. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.80/?3. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.75/?4. Based on your decision in part 1, what is your bet profit/loss when the spot rate at maturity is $1.65/?5. Based on your decision in part 1, what is your bet profit/loss when the spot rate at maturity is $1.55/?6. Draw a diagram to illustrate the payoff. Make sure to mark down the strike price, the break-even point, and the moneyness (in the money, at the money, and out of the money) on the diagram. II. Speculation with Currency Options As a trader, you become bearish on the British pound and decide to speculate with currency options that will mature in December. There are two options available: Call option: Strike price = $1.60/, and premium = $0.05/ Put option: Strike price = $1.60/, and premium = $0.04/Please answer the following questions:1. What type of options should you purchase: call or put option? Please explain.2. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.45/?3. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.50/?4. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.56/?5. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.70/?6. Draw a diagram to illustrate the payoff. Make sure to mark down the strike price, the break-even point, and the moneyness (in the money, at the money, and out of the money) on the diagram. image text in transcribed

HW#6 FIN525 International Financial Management Fall/2015 Name__________________ I. Speculation with Currency Options As a trader, you become bullish on the British pound and decide to speculate with currency options that will mature in December. Below are two options available: Call option: Strike price = $1.60/ and premium = $0.05/ Put option: Strike price = $1.60/ and premium = $0.04/ Please answer the following questions: 1. What type of options should you purchase: call or put option? Please explain. 2. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.80/? 3. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.75/? 4. Based on your decision in part 1, what is your bet profit/loss when the spot rate at maturity is $1.65/? 5. Based on your decision in part 1, what is your bet profit/loss when the spot rate at maturity is $1.55/? 6. Draw a diagram to illustrate the payoff. Make sure to mark down the strike price, the break-even point, and the moneyness (in the money, at the money, and out of the money) on the diagram. II. Speculation with Currency Options As a trader, you become bearish on the British pound and decide to speculate with currency options that will mature in December. There are two options available: Call option: Strike price = $1.60/, and premium = $0.05/ Put option: Strike price = $1.60/, and premium = $0.04/ Please answer the following questions: 1. What type of options should you purchase: call or put option? Please explain. 2. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.45/? 3. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.50/? 4. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.56/? 5. Based on your decision in part 1, what is your net profit/loss when the spot rate at maturity is $1.70/? 6. Draw a diagram to illustrate the payoff. Make sure to mark down the strike price, the break-even point, and the moneyness (in the money, at the money, and out of the money) on the diagram