Question
Prosperous Co. has purchased New Zealand dollar put options for speculative purposes. Each option was purchased for a premium of USD0.02 per unit, with an
Prosperous Co. has purchased New Zealand dollar put options for speculative purposes. Each option was purchased for a premium of USD0.02 per unit, with an exercise price of USD0.86 per unit. Prosperous Co. will purchase the New Zealand dollar before it exercises the options (only if it is feasible to exercise the options) It plans to wait until the expiration date before deciding whether to exercise the options. In the following table, fill in the net profit (or loss) per unit to Prosperous Co. based on the listed possible post rates of the New Zealand dollar on the expiration date.
possible spot rate of new zealand dollar on expiration date net profit(loss) per unit for prosperous co. (USD)
USD 0.79
USD 0.84
USD 0.87
USD 0.89
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