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Calculate the maximum gain and the maximum loss

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Reference no: EM132740557

US importer to pay German currency DM contract of 62,500 to German exporter in 60 days . Available Call option : Exercise Price 0.64, the premium is 0.02$ per one DM.

Draw:

Problem A. the payoff of this Call buy strategy if the DM expires at 0.70$ : indicating the Breakeven .

Calculate the cost of the contract , the gain or loss from this strategy.

Problem B. the payoff of buy Put strategy if the exercise price is 0.66$ and the premium is 0.02$ per one DM : indicating the Breakeven.

Calculate the Maximum gain and the Maximum loss.

Reference no: EM132740557

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