Future spot exchange rate

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Reference no: EM132042051

Spot exchange rate in 3 months is $1.27/€. What is the net profit per unit?

Short currency strangle

Call option premium = $0.03/€

Put option premium = $0.02/€

Call option strike price = $1.25/€

Put option strike price = $1.05/€

Maturity = 3 months

(Show All Work)

a. $0.05/€

b. $0.03/€

c. -$0.03/€

d. -$0.05/€

2. Jin Co. executes “Carry Trade”. Use the following information to compute profit or loss.

Borrowing rate on euro for the next month = 0.5%

Rate of return on funds invested in British pounds = 1%

Initial investments

Jin Co.’s own funds: $100,000

Jin Co.’s borrowed funds: €600,000

Current spot exchange rate : €1 = $1.20 & ?1 = $1.8

Future spot exchange rate (in 30 days): the euro appreciated by 3% against both the pound and the dollar (show all work)

a. $4,599

b. $58,110

c. $100,000

d. $104,599

Reference no: EM132042051

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