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Given the following information for a currency straddle using the Canadian dollar.:
Put and call option exercise price = $.75
Put option premium = $.014 per unit
Call option premium = $.01 per unit.
One option contract = C$50,000.00
a. What are the Break even points of the straddle? ________________
b. For the buyer of the straddle, calculate the profit/loss if the current spot price is $.78
c. For the writer of the straddle, calculate the profit/loss if the current spot price is $.78
d. Why do investors purchase currency straddles?
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