Question
Please ANSWER ALL questions NOT one of them with EXPLANATION: 1. A put option has an exercise price of $1.36/ and a premium of $.015/.
Please ANSWER ALL questions NOT one of them with EXPLANATION:
1. A put option has an exercise price of $1.36/ and a premium of $.015/. A call option has an exercise price of $1.36/ and a premium of $.035/. Individual option contracts are for 25,000. You sell 3 puts and sell 1 call. Your profit/loss if the spot rate when the option matures is $1.25/ is $_________ and your profit/loss if the spot rate when the option matures is $1.45/ is $_________.
2. No covered interest arbitrage opportunities and interest rate parity holing imply the same thing.
A.True
B.False
3. Jerry buys a call option on the EURO. Darla writes the call option that Jerry buys. The strike price is $1.33/ and the premium is $.04/. What is the breakeven ST for Jerry and Darla?
4. Interest rate parity suggests that if interest rates are 3% higher in Japan than in the U.S., the U.S. dollar should exhibit a forward (approximations are fine)
A.Premium of about 2%
B.Discount of about 3%
C.Premium of about 3%
D.Discount of about 9%
E.Discount of about 4%
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