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URGENT!!! Kelvin is a currency trader based in Singapore. Kelvin believes that Singapore dollar (S$) will appreciate versus the US dollar over the coming 90
URGENT!!! Kelvin is a currency trader based in Singapore. Kelvin believes that Singapore dollar (S$) will appreciate versus the US dollar over the coming 90 days...
Question Two (12 Marks) Kelvin is a currency trader based in Singapore. Kelvin believes that Singapore dollar (SS) will appreciate versus the US dollar over the coming 90 days. The current spot rate is US$0.6550/S$. Kelvin may choose between the following options on the Singapore dollar. Option Put on S$ Call on S$ Strike Price US$0.7000/SS US$0.7000/S$ Premium US$0.0003/S$ US$0.0247/S$ Required: 1) Should Kelvin buy a call or put on Singapore Dollars? Why? (2 marks) 2) What is Kelvin's break even price if adapts the strategy mentioned in part 12 (2 marks) 3) What is Kelvin's net profit or loss on one contract if the spot rate at the end of 90 days is USD 0.7800/S$? The size of one contract is S$50,000 (3 marks) 4) Using your answer from part 1), what is Kelvin's gross profit and net profit if the spot rate at the end of 90 days is $0.6800/CS? (3 marks) 5) Use your answer from part 1) and assume that on dayt before the expiration date of the option, the spot exchange rate is $0.6700/C$ and the option premium becomes $0.0325/C$. Calculate the intrinsic value and the time value components of the option premium? (2 marks)Step by Step Solution
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