Subject: FIN444 - International Financial Management

Sir, The information in the questions will not be given more than this with due respect. What should I do, sir? It will be helpful to post the answer. Thanks in advance sir.

The following information is currently available for 1000 British Pound (GBP) option expiring in a month:

Put Option Strike Price= 40 Thai Baht (THB)

Put Option Premium= 2 Baht per unit

Call Option Strike Price= 38 Thai Baht (THB)

Call Option Premium= 1 Baht per unit

Put Option with the same exercise price has a premium of 1 Baht per unit

Current Spot Rate= 39 Baht

Questions:

A. What is the total profit/loss for the buyer of the British Pound Straddle if GBP depreciates by 6% in one month? (Show all necessary calculations and mention that the option will be exercised or not. Just calculation is not enough. Please mention your steps.)

B. What is the total profit/loss for the buyer of the British Pound Strangle if GBP appreciates by 8% in one month? (Show all necessary calculations and mention that the option will be exercised or not. Just calculation is not enough. Please mention your steps.)