Question 2 [20+20 marks] 2.2 Suppose youlong one Australian dollar call and one Australian dollar put with an exercise exchange rate of 0.70 (USD/AUD) and 0.60 (USD/AUDrespectively. The price of call and the price of put is USD.02 and USD0.05, respectively. 2.1 Suppose you long one Australian dollar call and one Australian dollar put with an exercise exchange rate of 0.65 (USD/AUD). The price of call and the price of put is USD0.05. Using the 10 period (spot)exchange rates below: time Spot Exchange Rate (USD=AUD) time 0 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 Spot Exchange Rate (USD/AUD) 0.35 10.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10 4 9 10 11 1 13 14 8 9 10 11 12 13 14 15 1.10 (a) Compute the net call payoff net put payoff andnet combined payoff. (6) Plot separately the Net Long callpayoff the net longput payoff and the net combined payoff. (c)Name and provide definition of the shape of the combined payoffobtained frompart (6) (a) Compute the net call payoff net put payoff andnet combined payoff (b) Plot separately the Net Long callpayoff the net longput payoff and the net combined payoff. (c)Name and provide definition of the shape of the combined payoffobtained frompart (b)? Question 2 [20+20 marks] 2.2 Suppose youlong one Australian dollar call and one Australian dollar put with an exercise exchange rate of 0.70 (USD/AUD) and 0.60 (USD/AUDrespectively. The price of call and the price of put is USD.02 and USD0.05, respectively. 2.1 Suppose you long one Australian dollar call and one Australian dollar put with an exercise exchange rate of 0.65 (USD/AUD). The price of call and the price of put is USD0.05. Using the 10 period (spot)exchange rates below: time Spot Exchange Rate (USD=AUD) time 0 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 Spot Exchange Rate (USD/AUD) 0.35 10.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10 4 9 10 11 1 13 14 8 9 10 11 12 13 14 15 1.10 (a) Compute the net call payoff net put payoff andnet combined payoff. (6) Plot separately the Net Long callpayoff the net longput payoff and the net combined payoff. (c)Name and provide definition of the shape of the combined payoffobtained frompart (6) (a) Compute the net call payoff net put payoff andnet combined payoff (b) Plot separately the Net Long callpayoff the net longput payoff and the net combined payoff. (c)Name and provide definition of the shape of the combined payoffobtained frompart (b)
