What is the breakeven point

Assignment Help Financial Management

Reference no: EM131547726

Currently you have a short position on €. The current rate is $1.1/€. You are expecting the $/€ exchange rate to go down, but still worried about a rate increase. You want to limit your loss if the rate goes up. What should you do? You can buy or sell a call or a put on €.

These are the quotations for the call and put options:

Call on €: exercise price = $1.1/€, premium=$0.03

Put on €: exercise price = $1.1/€, premium=$0.06

Please draw the graph for your combined position. What is the maximum profit that you can make with this combined position? What is the maximum possible loss? What is the breakeven point?

Reference no: EM131547726

Questions Cloud

Illustrates primary financial goal of for-profit business : Which scenario illustrates the primary financial goal of a for-profit business?

Find axle weighted average cost of capital : Axle Co.'s shareholders require a 22.5 percent return and Axle's bondholders require a 14 percent return. Based on a 33.33 percent.

What strategy would maximize expected profits in this case : The market for high-quality caviar is dependent on the weather. If the weather is good, there are many fancy parties and caviar sells for $30 per pound.

What is the net cost of the call premium : The call premium is 8%. What is the net cost of the call premium?

What is the breakeven point : What is the maximum profit that you can make with this combined position? What is the breakeven point?

What is annualized cost of trade credit : what is the annualized cost of trade credit?

What are equal annual payments need to fully amortize loan : What are the equal annual payments need to fully amortize the loan?

Explain the market volatility : This week our discussion is all about equity valuations. As we all know market has been going up since the election and the market volatility (VIX) is very low.

Although bill has nothing saved for retirement so far : Although Bill has nothing saved for retirement so far, he has determined that he will need to have $633,000 in the account when he retires.

User Account

All Pages