Select Page

## finance-FIN525 International Financial Management

HW#6
FIN525 International Financial
Management
Fall/2015
Name__________________

I. Speculation with Currency
Options
As a trader, you become bullish on the British pound and
decide to speculate with currency options that will mature in December. Below
are two options available:
Call
option: Strike price = \$1.60/Â£ and premium = \$0.05/Â£
Put
option: Strike price = \$1.60/Â£ and
1.
What type of options should you purchase: call

2.
Based on your decision in part 1, what is your
net profit/loss when the spot rate at maturity is \$1.80/Â£?

3.
Based on your decision in part 1, what is your
net profit/loss when the spot rate at maturity is \$1.75/Â£?

4.
Based on your decision in part 1, what is your
bet profit/loss when the spot rate at maturity is \$1.65/Â£?

5.
Based on your decision in part 1, what is your
bet profit/loss when the spot rate at maturity is \$1.55/Â£?

6.
Draw a diagram to illustrate the payoff. Make
sure to mark down the strike price, the break-even point, and the moneyness (in
the money, at the money, and out of the money) on the diagram.

II. Speculation with Currency
Options
As a trader, you become bearish on the British pound and
decide to speculate with currency options that will mature in December. There
are two options available:
Call
option: Strike price = \$1.60/Â£, and premium = \$0.05/Â£
Put
option: Strike price = \$1.60/Â£, and
1.
What type of options should you purchase: call

2.
profit/loss when the spot rate at maturity is \$1.45/Â£?

3.
Based on your decision in part 1, what is your
net profit/loss when the spot rate at maturity is \$1.50/Â£?

4.
Based on your decision in part 1, what is your
net profit/loss when the spot rate at maturity is \$1.56/Â£?

5.
profit/loss when the spot rate at maturity is \$1.70/Â£?

6.
Draw a diagram to illustrate the payoff. Make
sure to mark down the strike price, the break-even point, and the moneyness (in
the money, at the money, and out of the money) on the diagram.

```We pride ourselves in writing quality essays

#### Plagiarism Free

We use anti-plagiarism software to ensure you get high-quality, unique papers. Besides, our writers have a zero plagiarism mentality

#### On Time Delivery

Your essay will be delivered strictly within the deadline.  If you have an urgent order, we can do it!

#### Money Back Guarantee

We offer warranty service, including free revisions, and a right to request a refund incase your expectations are not met!

#### THE BEST PAPER WRITER HELPER

• Say “NO” to plagiarism – FREE plagiarism report as an addition to your paper
• The lowest prices that fit excellent quality
• Authorship – you are the one who possesses the paper. We DO NOT re-sale or re-use any of them.

### Our Freebies

• Free Cover Page
• Free Revisions
• Free Reference Page