Answered step by step
Verified Expert Solution
Question
1 Approved Answer
QUESTIONS THREE (10 MARKS) a) Jack bought a 3-month British pound futures contract for $1.4400/ only to see the dollar appreciate to a value of
QUESTIONS THREE (10 MARKS) a) Jack bought a 3-month British pound futures contract for $1.4400/ only to see the dollar appreciate to a value of $1.4250 at which time he sold the pound futures. If each pound futures contract is for an amount of 62,500, how much money did Jack gain or lose from his speculation with pound futures? (3 marks) b) Assume that a writer sells a put option on British pounds (with a strike price of $1.50) for $0.05 per unit. A pound option represents 31,250 units. Assume that at the time the writer sells the option, the spot rate of the pound is $1.51 and continually rises to $1.62 by the expiration date. How much money did the writer gain or lose from selling the put option? (3 marks) c) Explain the difference between foreign currency options and futures. (4 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started