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Time left 0:19:1 Suppose an exchange rate dealer/trader of the Pound intends to create a butterfly spread by buying one call with $1.80 strike price
Time left 0:19:1 Suppose an exchange rate dealer/trader of the Pound intends to create a butterfly spread by buying one call with $1.80 strike price (premium = $0.05), buying one call with $2.00 strike price (premium $0.02), and selling two calls with $1.90 strike price at a premium of $0.03 each. Each contract has one unit of the underlying asset (Pound). 1- What is the maximum profit that the exchange rate dealer could make? 2- What is the level of profit if ST=$1.90? 3- What is the breakeven ST, which lies between $1.80 and $1.90
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