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The table below shows the premiums for several currency options (all the options are maturing in 6 months): Call on AUD Put on AUD Option

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The table below shows the premiums for several currency options (all the options are maturing in 6 months): Call on AUD Put on AUD Option strike price USD 0.70 for 1 AUD USD 1.20 USD 0.75 Option strike price USD 0.85 for 1 AUD USD 0.9 USD 1.1 The current and 6-month spot currency rates are given below. 1 6-month Spot rate 1 USD = 1.82 AUD 1 AUD = 0.55 USD Current Spot Rate 1 USD = 1.67 AUD 1 AUD = 0.60 USD AUD/USD USD/AUD 1. Calculate the current premium for a 6-month maturity put option on USD with strike price of USD 0.85 for 1 AUD. Show your working. [2 marks] ii. Calculate the terminal payoff for a 6-month maturity call option on USD with strike price of USD 0.70 for 1 AUD. [2 marks] The table below shows the premiums for several currency options (all the options are maturing in 6 months): Call on AUD Put on AUD Option strike price USD 0.70 for 1 AUD USD 1.20 USD 0.75 Option strike price USD 0.85 for 1 AUD USD 0.9 USD 1.1 The current and 6-month spot currency rates are given below. 1 6-month Spot rate 1 USD = 1.82 AUD 1 AUD = 0.55 USD Current Spot Rate 1 USD = 1.67 AUD 1 AUD = 0.60 USD AUD/USD USD/AUD 1. Calculate the current premium for a 6-month maturity put option on USD with strike price of USD 0.85 for 1 AUD. Show your working. [2 marks] ii. Calculate the terminal payoff for a 6-month maturity call option on USD with strike price of USD 0.70 for 1 AUD. [2 marks]

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