Calculate the gross pay-off at the spot exchange rates

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A trader holds a call option and put option on the New Zealand dollar. The Call gives the trader the right to 1 million NZD at an exercise exchange rate of 0.70(USD/NZD). The put gives the trader the right to 1 million NZD at an exercise exchange rate of 0.70 (USD/NZD). Determine whether or not the trader will exercise the call option and put option and then calculate the gross pay-off at the following spot exchange rates: (a) 0.75 and (b) 0.65.

Reference no: EM132951566

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