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Calculate mr ben profit if the spot rate at the end

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Reference no: EM132562837

Mr. Ben is a speculator, who invests in options. The current spot rate is TL 5.96 /€ and he believes that Euro will be around TL 6.10/€ in the coming 90 days. Using the option quotations below, answer the following questions.

90 Days options:              CALL OPTION             PUT OPTION

Strike Price                       TL 5.98/€                TL 5.98/€

Premium                             TL 0.001/€                 TL 0.003/€

Question a) Which of the given options should Mr. Ben buy according to his estimations? Why?

Question b) Using your answer to part (a), Calculate Mr. Ben's profit/ loss if the spot rate at the end of 90 days is TL5.97/

Question c) Using your answer to part 'a', what is the break-even spot rate for Mr. Ben at the maturity date

Reference no: EM132562837

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