What would be the total profits-losses

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1. The dollar to the euro is quoted at $1.1260/€ today. Put options on the euro with an exercise price of $1.1280/€ and expiration in three months are selling for $0.0362/€. Each option contract calls for the exchange of €62,500. You start with $126,400 (plus or minus enough dollars to round to nearest whole contract).

a. If you buy the euro puts, how much premium do you pay per contract?

b. How many put contracts can you buy?

c. How much more money do you need to add to (or keep from) the $126,400 to round the number of contracts to the nearest whole number.

d. If in three months the exchange rate is $1.0918/€:

i. Would you exercise?

ii. What would be the total payoffs?

iii. What would be the total profits/losses?

Reference no: EM132641597

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