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Today is the expiration day of a put option on the euro that you purchased two weeks ago when the spot rate was $1.0838/. The
Today is the expiration day of a put option on the euro that you purchased two weeks ago when the spot rate was $1.0838/. The strike rate on the option is $1.0820/ and the premium was $0.0320/.
What were the intrinsic value and the time value of the put at the time of purchase?
If todays spot rate is $1.0680/, would you exercise? Why? How much would your payoff be? How much would your profit/loss be?
Repeat part b under the assumption that todays spot rate is $1.1012/.
At what expiration spot rate would you break even?
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