Question
Speculating with Currency Put Options. Auburn Co. has purchased Canadian dollar put options for speculative purposes. Each option was purchased for a premium of $.02
Speculating with Currency Put Options.
Auburn Co. has purchased Canadian dollar put options for speculative purposes. Each option was purchased for a premium of $.02 per unit, with an exercise price of $.86 per unit. Auburn Co. will purchase the Canadian dollars just before it exercises the options (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 Auburn Co. based on the listed possible spot rates of the Canadian dollar on the expiration date.
Possible Spot Rate of Canadian Dollar on Expiration Date: $0.76 $0.79 $0.84 $0.87 $0.89 $0.91
what are the Net Profit (Loss) per Unit to Auburn Corporation if each Spot Rate Occurs
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