PLEASE SHOW WORK

1. Coke needs around GBP 100,000 in 60 days. It decides to buy 3 call options (93,750 units) for $0.05/unit with an exercise price of 1.50 USD/GBP. In 60 days the actual exchange rate is 1.75 USD/GBP. Should Coke exercise the option, and what is the potential net profit or loss?

2. In the previous example, what would be the net value of the call option if the GBP is 1.25 USD/GBP in the future?

3. You buy an American put option on GBP 31,250 with a cost of $0.04/unit and an exercise price of 1.50 USD/GBP. What is your net position of the put option if the actual market price of the GBP is 1.25 USD/GBP?

4. You write (sell) a call option on EUR 62,500 with an exercise price of 1.40 USD/EUR, at a premium of $0.02. The buyer of the option decides to exercise the option when the current exchange rate is 1.45 USD/EUR. What is the writers (sellers) net profit or loss?

5. IBM requires EUR 10,000,000 to pay for imported computer supplies in 6 months. They engage in a forward contract with Citibank at a forward rate of 1.65USD/EUR. Six months later the actual spot rate is 1.62USD/EUR. Did IBM save or lose from this deal?

6. Joe Gamble believes that the Swiss franc is going to appreciate against the dollar. He speculates by purchasing one futures contract with a price of 0.69 USD/CHF in 3 months. The current spot rate is 0.65 USD/CHF, and the actual spot rate in 3 months is 0.75 USD/CHF. Did Joe make the right decision?

7. Merck will receive GBP 500,000 in 9 months from their London subsidiary. Since they will repatriate the funds to the U.S., they engage in a forward contract with BankAmerica to sell pounds at the forward rate of 1.55 USD/GBP. In 9 months the actual spot rate is 1.60 USD/GBP. Determine Mercks net gain or loss?