A nbspel paso widget inc bought euro call option for a, Ask an Expert

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A. El Paso Widget Inc. bought Euro call option for a strike price of $1.10 for March, 2014 paying 15.25 cents per unit. When they exercised the option, the spot price was $ 1.36. There are 62,500 units per Euro option.

i. What is the break-even point for this option?

ii. Compute the total net profit/loss. What is the rate of return?

B. ABC corp. bought SF currency put option for April 2007, for a strike price of $0.8055 per SF. They paid a premium of 16.2 cents per unit. At the time when ABC Corporation considered exercising the put, the spot price was $ 0.6125 per SF. There are 62,500 units in a SF currency option.

i. What is the break-even point for this option?

ii. Is it worthwhile exercising this option? Compute the total net profit/loss and the rate of return.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92077841

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