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Quasik Corporation would like to use a currency option to speculate on the value of the Canadian dollar in 90 days. Quasik believes the value of the Canadian dollar in 90 days will be $.70. Currently, a 90-day call option with an exercise price of $.78 and a premium of $.01 is available. Also, a 90-day put option with an exercise price of $.75 and a premium of $.01 is available. Given Quasik’s beliefs about the spot rate for the Canadian dollar in 90 days, which of the two options does Quasik purchase? Suppose Quasik buys 1 contract (100 options). What is Quasik’s profit or loss, if in 90 days the spot rate for the Canadian dollar is $0.77?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92089789

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