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Suppose a currency call option has an exercise price of A$ x where x is a positive number and a premium of A$ p where

Suppose a currency call option has an exercise price of A$x where x is a positive number and a premium of A$p where p is a positive number.

a. Calculate the break-even price in terms of p and x. (2 marks)

b. What is the maximum loss for the option buyer? (1 mark)

c. Explain why the maximum loss for the option writer is unlimited. (3 marks)

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Fundamentals Of Futures And Options Markets

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