What exchange rate do you start to lose money

Assignment Help Financial Management

Reference no: EM131354229

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?

Reference no: EM131354229

Questions Cloud

In evaluating capital budgeting proposed project : In evaluating a Capital Budgeting proposed project, you have the expected After Tax Cash Flow, the life of the proposed project and the Weighted Average Cost of Capital (WACC). The most important of these is the ___ because ___

Find the expected dividends : Selena Gomez has asked you to analyze the following stock as a possible investment. It's most recent dividend was $1.95. Selena believes that the dividend will grow at the rate of 3.25% annually for the next 3 years. Find the expected dividends. Find..

Difference between short synthetic and short currency : Why would anyone do a long synthetic or a short synthetic? What is the difference between a long synthetic and a long currency? What is the difference between a short synthetic and a short currency?

Net present value approach to capital budgeting : The decision criterion in the net present value approach to capital budgeting is to accept the project if ______, and otherwise to reject the project.

What exchange rate do you start to lose money : 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?

Cash flows in sophisticated capital budgeting techniques : The rate used to discount the firm's cash flows in sophisticated capital budgeting techniques is called the:

Find the future value of present sum of money : The Jersey Corporation has 70% of its capital structure in the form of equity capital. $100,000 in capital needs to be raised for a projectbut only $20,000 in funds is available through retained earnings. How much must be raised through common stock ..

Foreign stock exchange-example of direct foreign investment : A U.S. corporation investing in a foreign corporation by purchasing stock on a foreign stock exchange is an example of direct foreign investment. Most major countries in the world have agreed on fixed exchange rates in order to facilitate internation..

Why would the firm cost of debt be lower : If a firm's bonds are currently yeilding 8% in the marketplace, why would the firm's cost of debt be lower?

User Account

All Pages