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Profit or loss on gretchen swiss franc call option

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Reference no: EM132364571

Gretchen is considering buying call options on Swiss francs with a March expiration date and a strike price of $0.77/SF. The price of a call option on Swiss francs is $0.03/SF. The current spot rate of exchange is $0.81/SF. Gretchen believes that the spot Swiss franc exchange rate in March will be between $0.74/SF and $0.88/SF, with a most likely value of $0.81/SF.

a. Calculate the profit or loss on Gretchen's Swiss franc call option at expiration as a function of the exchange rate S$/SF.

Show a diagram of the profit or loss of Gretchen's Swiss franc call option at expiration as a function of the exchange rate S$/SF.

Reference no: EM132364571

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