Q1. Part 1

What are the differences between buying a forward contract with a forward price of $100 and buying a call option with a strike price of $100 on the same underlying asset?

Check all that apply:

The option can only be used in the future, while the forward can be used to buy the asset now.

The option position is riskier due to counterparty risk.

You need to pay upfront to buy an option, but not for a forward contract.

The option gives the buyer a choice about buying the asset, while the forward contract does not.

The forward contract is always more profitable than the option.

Intro

Q2. You sold 44,000 euros forward at a forward price of 1.08 USD per euro.

Part 1

What is your profit or loss if the exchange rate is 0.92 USD per euro at the end of the contract (in USD)?

Part 2

What is your profit or loss if the exchange rate is 1.3 USD per euro at the end of the contract (in USD)?

Intro

You bought 20,000 Canadian dollars (CAD) forward at a forward price of 0.74 USD per CAD.

Part 1

What is your profit or loss if the exchange rate is 0.67 USD per CAD at the end of the contract (in USD)?

Part 2

What is your profit or loss if the exchange rate is 0.83 USD per CAD at the end of the contract (in USD)?

Intro

An investor bought a call option on Mexican pesos for $0.0008 per unit. The option has a strike price of $0.056 and covers 100,000 pesos. Assume that the option can only be exercised on its expiration date.

Part 1

What will be the net profit (or loss) to the investor if the exchange rate is $0.065 per peso on the expiration date (in USD)?

Part 2

What will be the net profit (or loss) to the investor if the exchange rate is $0.047 per peso on the expiration date (in USD)?

Intro

An investor bought a put option on euros for $0.005 per unit. The option has a strike price of $1.12 and covers 10,000 euros. Assume that the option can only be exercised on its expiration date.

Part 1

What will be the net profit (or loss) to the investor if the exchange rate is $1.18 per euro on the expiration date (in USD)?

Part 2

What will be the net profit (or loss) to the investor if the exchange rate is $1.06 per euro on the expiration date (in USD)?