Calculate the value of the put option

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A speculator writes (sells) a put option on the Singapore dollar (SGD) at an exercise exchange rate (or strike price) of 0.7200 (USD/SGD). The size of the option contract is SGD 100,000. The premium is USD 0.0050 per SGD. Ignore all interest rates.

(i) At which spot exchange rate on the expiration date will the speculator break even?

(ii) Assume that the spot exchange rate on the expiration date is 0.7100 (USD/SGD). Calculate the value of the put option and the speculator's net profit/loss.

Reference no: EM133072320

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