Calculate the Maximum gain and the Maximum loss

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Reference no: EM132767616

Question - 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:

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.

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: EM132767616

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