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1. From the perspective of the writer of a put option written on €62,500. If the strike price is $1.55/€, and the option premium is $1,875, at what exchange rate do you start to lose money?

2. The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €125,000 with a strike price of $1.50 = €1.00. If you pay an option premium of $4,000 to buy this call, at what exchange rate will you break-even?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92167108

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