Business

Brendan Bush

2 February, 00:40

a). Suppose instead of stock, the underlying asset of the option contract is currency and each contract covers 100,000 euros. Suppose also that a call option on the euro expiring in three months has a strike price of $1.00 and is priced at $0.0385. Determine the premium, profit, and breakeven spot exchange rate at expiration if the spot exchange rate at expiration is $1.10.

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