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Please show your work Thank you! You work for CIBC Currency Funds in Toronto. You are something of a contrarian - as opposed to most
Please show your work Thank you!
You work for CIBC Currency Funds in Toronto. You are something of a contrarian - as opposed to most of the forecasts, you believe the Canadian dollar (CS) will appreciate versus the U.S. dollar over the coming 90 days. The current spot rate is $0.6750/C$. You may choose between the following options on the Canadian dollar. Option Put on C$ Call on C$ Strike Price $0.7100 Premium $0.00029/C$ $0.00048/C$ $0.7100 a. Should you buy a put on Canadian dollar or a call on Canadian dollars? Why? b. What is your breakeven price on the option purchased in part (a) C. Using your answer from part (b), what is your gross profit and net profit (including premium) if the spot rate at the end of 90 days is $0.7600? What is your profit if you invested in 100,000 options? What is the total cost of your options? d. Using your answer part (b) what is your gross profit and net profit (including premium) if the spot rate at the end of 90 days is $0.8250Step by Step Solution
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