What exchange rate will you break-even

Assignment Help Financial Management

Reference no: EM132016623

1. The current spot exchange rate is $1.50 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.55 = €1.00. If you pay an option premium of $5,000 to buy this call, at what exchange rate will you break-even?

A) $1.47 = €1.00

B) $1.50 = €1.00

C) $1.58 = €1.00

D) $1.63 = €1.00

E) $1.68 = €1.00

2. Today's settlement price on a Chicago Mercantile Exchange (CME) yen futures contract is $0.8011/¥100. Your margin account currently has a balance of $2,000. The next three days' settlement prices are $0.8057/¥100, $0.7996/¥100, and $0.7985/¥100. (The contractual size of one CME yen contract is ¥12,500,000). If you have a short position in one futures contract, the changes in the margin account from daily marking-to-market, will result in the balance of the margin account after the third day to be

A) $1,425.

B) $1,675.

C) $2,000.

D) $2,325

E) $3,425

Reference no: EM132016623

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