The net profit to a holder of a call option

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1. The net profit to a holder of a call option, with a strike price of $1.540/British pound, premium that he paid of $.010 and spot rate of $1.510/ British pound is?

2. You have a 2 year contract to export your linen products to Paris and receive 500,000 Euros per month over that period. The borrowing rate in Paris 6.0% per year and the investing rate in UK is 3.0% per year. To eliminate any currency risk from your contract you should:

a. borrow 11.28 million euros

b. borrow 11.63 million euros

c. invest 11.28 million euros

d. invest 11.63 million euros

3. The AUS$ spot rate is US$.8203/AUS$. The 9month forward rate is US$.8460/AUS$. What is the forward as a percentage and use the answer in a sentence that correctly states the relationship?

Reference no: EM13947265

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