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US importer agrees to pay C$50,000 to a Canadian exporter in 60 days. To reduce ER risk, the US importer purchase a European call option
US importer agrees to pay C$50,000 to a Canadian exporter in 60 days. To reduce ER risk, the US importer purchase a European call option (a C$ 64 call option), which gives him the right to buy C$50,000 at the exercise price of $0.64/C$ in 60 days.Given the following information: Contract size: C$50,000,Exercise price (X): $0.64/C$,Option price = $0.02/C$.
1) What is the break-even value?
2) Show thePayoff profileof your call option below.
Future Spot.62.64.66.68.70
Exercise Price (X)
Opt Premium (P)Unit Profit
Total Profit (Loss)
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