Call option from currency dealer with strike price

Assignment Help Financial Management
Reference no: EM131084553

You are offered a chance to by a put or call option from a currency dealer with a strike price of USD 0.8300/CHF with June expiration and premium of USD 0.0050/CHF. Your Magic 8 Ball tells you that the spot exchange rate will reach USD. 8400/CHF sometime between now and June. With USD 100,000 you found, you want to make as much speculative profits as possible using FX options.

A) Carefully derive and draw the profit functions on the two options to help you decide. Be sure to carefully label all axes, strike price, and the break-even point. Which option should you purchase? Exactly which transaction must you carry out and when in order to make the speculative profits?

B) If you used all of the USD 100,000 to speculate on the option you suggested in part A, what are your:

Total Net Profits

Notional Principal

The rate of return on this speculation assuming your Magic 8 Ball is right? (What is your loss if the Magic 8 Ball is wrong?)

Reference no: EM131084553

Questions Cloud

What are the projects annual cash flows during years : New project analysis You must evaluate a proposal to buy a new milling machine. The base price is $106,000, and shipping and installation costs would add another $16,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 yea..
Chances for a promotion : You have worked at your company for eleven (11) years. You have returned to college to earn a Bachelor's degree in order to increase your chances for a promotion.
Estimate the corrected counting rate rc : The 95% confidence interval associated with the corrected counting rate.
Indifferent between accepting the project and not accepting : Your firm is contemplating the purchase of a new $530,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $50,000 at the end of that time. At what level of pretax cost ..
Call option from currency dealer with strike price : You are offered a chance to by a put or call option from a currency dealer with a strike price of USD 0.8300/CHF with June expiration and premium of USD 0.0050/CHF. Your Magic 8 Ball tells you that the spot exchange rate will reach USD. 8400/CHF some..
Evaluating capital budgeting project : Depreciation methods Kristin is evaluating a capital budgeting project that should last for 4 years. The project requires $750,000 of equipment. She is unsure what depreciation method to use in her analysis, straight-line or the 3-year MACRS accelera..
Subject to the same randomness of wind and tide : We continue Problem 5.8.2 where the vector X of finish times has correlated components. Let W denote the finish time of the winning boat. We wish to estimate P[W ≤ 25], the probability that the winning boat finishes in under 25 minutes.
Calculate the current yield on this bond : Megan owns a 10-year bond with a par value of $1,000 and a coupon rate of 8%. The current market price of this bond is $1,194. If market interest rates rise, will the market price of Megan’s bond change? If so, in which direction? Explain. Calculate ..
Hymn for a weekend : Please watch the Coldplay video for "Hymn for a Weekend" (on YouTube) and listen to the lyrics. Then answer the following questions

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd