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Make a speculating with currency call options

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Problem 1: Make a Speculating with currency call options

Suppose that you are a speculator that anticipates an appreciation of the Singapore dollar (S$). You purchase a call option contract on Singapore dollars. Each contract represents S$25,000, with a strike price of $0.63 and call option premium of $0.03 per unit.

Suppose that the spot price of the Singapore dollar is $0.65 just before the expiration of the call option contract. At this time, you call the contract and immediately sell the Singapore dollars to a bank at the current spot price.

Reference no: EM132945498

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