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The dollar to the Japanese yen is quoted at $0.008285/ today. Call options on the yen with an exercise price of $0.008295/ and expiration in
The dollar to the Japanese yen is quoted at $0.008285/ today. Call options on the yen with an exercise price of $0.008295/ and expiration in three months are selling for $0.000878/. Each option contract calls for the exchange of 6.25 million. You start with $230,000 (plus or minus enough dollars to round to nearest whole contract).
If in three months, the exchange rate is $0.009482/:
Would you exercise?
Assuming you adjust the number of dollars as $230,000 , what would be your total payoffs?
What would be your total profits/losses?
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