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Diagram the combined dollar profit schedule

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Maria just bought 2 contracts of put options and, at the same time, 1 contract of call option on the Swiss francs (SF) in the Philadelphia Stock Exchange at the strike price of 55 cents per franc. Each option contract is for SF 10,000. The option will expire in three months. The put premium is 2.00 cents per SF and the call premium is 2.50 cents per SF.

(1) Diagram the 'combined' dollar profit schedule against the future spot exchange rate.

(2) Compute and show the breakeven future spot exchange rates on the diagram.

(3) What are the maximum possible loss and maximum possible profit in dollar terms?

Reference no: EM133275101

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