Calculate the exchange rate at maturity

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Reference no: EM131546923

Assume we are talking about a put option on a bond in which the contract is on $100,000 face value bonds. Assume further, that the put option costs $0.10. (a) Create a payoff and profit table for the put option if the strike price is $0.85. Calculate the bond price at maturity for which the owner of the put will break even. (b) Create a payoff and profit table for the put option if the strike price is $1.15. Calculate the stock price at maturity for which the owner of the put will break even. Now assume we are talking about options on the British pound, where the contract is on £125,000. (a) Create a payoff and profit table for a call option on the pound which has a strike price of $1.35, and costs $0.05. Calculate the exchange rate at maturity for which the owner of the call will break even. (b) Create a payoff and profit table for a put option on the pound which has a strike price of $1.55, and costs $0.15. Calculate the exchange rate at maturity for which the owner of the call will break even.

Reference no: EM131546923

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