Suppose you believe that the Canadian dollar (C$) will appreciate vs. the US$ over the coming 180 days. The current spot is $0.7850/C$. You may choose between the following options on the Canadian dollar:

a) Which option would you buy (call vs. put)? Justify your decision.

b) Using the choice in (a), what is the break-even price?

c) Using the choice in (a), what are the gross and net profit (including the premium) if the spot rate at the end of the 180 days is $0.885/C$?

d) Using the choice in (a), what are the gross and net profit (including the premium) if the spot rate at the end of the 180 days is $0.946/ C$?

\begin{tabular}{|c|c|c|} \hline Option & Strike Price & Premium \\ \hline Put on C\$ & $0.85/C$ & $0.0007/C$ \\ \hline Call on C\$ & $0.85/C$ & $0.0421/C$ \\ \hline \end{tabular}