Determine future spot price

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Reference no: EM132058987

A speculator is considering the purchase of five three-month British pound put options with a striking price of $1.60 per £. The premium is $0.04 per pound. The standard size of each option contract is 10,000 pounds.

(a) Determine the future spot price at which the speculator will only break even.

(b) What would be the speculator’s profit if the pound depreciates to $1.57 per £?

Reference no: EM132058987

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