The following graph shows the contingency graph for purchasers of euro call options, with a premium of $0.04 and an exercise price of $1.42.NET PROFIT PER UNIT (Dollars per unit)0.050.040.030.020.010 H-0.01-0.02-0.03-0.0417-0.05O1.38 1.40 1.42 1.44 1.46 1.48 1.50 1.52 1.54 1.56FUTURE SPOT RATE (Dollars per euro)(?)According to the graph, if the spot rate turns out to be $1.48, and the option is exercised, the buyer willAccording to the graph, break-even price is $1.46losegainper unit.

A call option buyer is expecting markets to go up and is betting on the increase in spot rate vis a…

NET PROFIT PER -0.01 -0.02 -0.03 -0.04 O O -0.05 + 1.38 1.40 1.42 1.44 1.46 1.48 1.50 1.52 1.54 1.56 FUTURE SPOT RATE (Dollars per euro) According to the graph, if the spot rate turns out to be $1.48, and the option is exercised, the buyer will According to the graph, break-even price is $1.46 lose gain per unit.

NET PROFIT PER -0.01 -0.02 -0.03 -0.04 O O -0.05 + 1.38 1.40 1.42 1.44 1.46 1.48 1.50 1.52 1.54 1.56 FUTURE SPOT RATE (Dollars per euro) According to the graph, if the spot rate turns out to be $1.48, and the option is exercised, the buyer will According to the graph, break-even price is $1.46 lose gain per unit.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 28QA

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The following graph shows the contingency graph for sellers of euro call options, with a premium of $0.08 and an exercise price of $1.16. NET PROFIT PER UNIT (Dollars per unit) 0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 -0.01 -0.02 -0.03 -0.04 -0.05 -0.06 -0.07 -0.08 -0.09 1.12 1.14 1.16 1.18 1.20 1.22 1.24 1.26 1.28 1.30 FUTURE SPOT RATE (Dollars per euro) According to the graph, if the spot rate turns out to be $1.18, and the option is exercised, the seller will According to the graph, break-even price is per unit.
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