QUESTION 9: GIVEN DATA:

SOLUTION
A.) Since Giri expects the Canadian dollar to appreciate versus
he should buy a call on Canadian dollars. Giri should buy a
call on Canadian dollar because the spot rate is greater than
the strike rate.
Spot Rate > Strike Rate
C$1.4815/$ > C$1.4286/$
B.) Break Even Price= Strike Price on Call on Yen + Premium
Break Even Price =
=
C.) Gross Profit = Ending Spot Rate - Strike Price
Gross Profit =
=
Net Profit = Ending Spot Rate - Strike Price Premium
Net Profit =
=
D.) Gross Profit = Ending Spot Rate - Strike Price
Gross Profit =
=
Net Profit = Ending Spot Rate - Strike Price Premium
Net Profit =
=
Current spot rate = 0.675 OR 1.4815
Maturity of option = 90 days
Strike price on Put on Yen = 0.7 OR 1.4286
Strike price on Call on Yen = 0.7 OR 1.4286
Premium on Put on Yen = 0.00003
Premium on call on Yen = 0.0249
Ending Spot Rate = 0.76 AND 0.825
0.7249
$0.7249/C$
0.06
$0.06/C$
0.0351
$0.0351/C$
0.125
$0.125/C$
0.1001
$0.1001C$
QUESTION 9: ASSUMPTIONS: Bolivares/$
Spot rate 1600
Strike rate 1800
Notional principal (US$) 250000
Notional principal (bolivares) 400000000
$/Bolivares Cents/Bolivares
0 0.0625
0 0.055556