What will be the profit of the call

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Problem 1: You own a call option on a Brambles share with an exercise price of $12. The option costs $0.50. The option will expire in exactly six months' time.

i) If the share is trading at $9 in six months, what will be the profit of the call?
ii) If the share is trading at $18 in six months, what will be the profit of the call?
iii) Draw a profit diagram showing the profit of the call as a function of the share price at expiration.

Problem 2: A U.S. company expects to receive 1 million Canadian dollars in six months. Explain how the exchange rate risk can be hedged using (i) a forward contract; and (ii) an option.

Reference no: EM132918536

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