1. You can trade for a 1-month call option on the Euro. Assume a strike price of $1.15/and a call premium of $0.02.
2. If you think the exchange rate is going to go down (less dollars per euro), will you buy or sell a call option? Why?
3. Draw the payoff diagram for both buying and selling the call. Find the breakeven point for both of them.

c. What is the maximum profit and loss for each strategy?

d. Assuming you sell a call, will the option be exercised if the 1-month market

price is 1.05? Why?