You want you to sell 1.46 million British pounds (GBP) using put options and foreign exchange market. How much would be the net proceeds to sell GBP1.46 million if the spot rate is A$1.8501 at the maturity (i.e., after 5 months)? 

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Net profit per unit Net profit per unit Contingency graph for purchasers of British pound call options +A$0.06 +A$0.04 +A$0.02- Exercise price = A$1.50 Premium =A$0.02 -A$0.02 -A$0.04 -A$0.06 Future Spot Rate A$1.46 A$1.48 A$1.50 $1.52 A$1.54 Net profit per Unit +A$0.06 +A$0.04 +A$0.02 -A$0.02 -A$0.04 -A$0.06 Contingency graph for purchasers of British pound put options Exercise price = A$1.50 Premium = A$0.03 Future spot rate A$1.46 A$48.A$1.50A$1.52 A$1.54 Contingency graph for sellers of Contingency graph for sellers of British pound call options British pound put options +A$0.06 +A$0.06 Exercise price - A$1.50 Exercise price - A$1.50 +A$0.04 Premium =A$0.02 +A$0.04 Premium = A$0.03 +A$0.02 A$1.46 A$1.48 A$1.50 A$152 $1.54 -A$0.02 Future spot rate -A$0.04- -A$0.06- Net profit per unit +A$0.02 AS16 A$1.48 A$1.50 A$1.52 A$1.54 -A$0.02- Future spot rate -A$0.04- -A$0.06 Net profit per unit Net profit per unit Contingency graph for purchasers of British pound call options +A$0.06 +A$0.04 +A$0.02- Exercise price = A$1.50 Premium =A$0.02 -A$0.02 -A$0.04 -A$0.06 Future Spot Rate A$1.46 A$1.48 A$1.50 $1.52 A$1.54 Net profit per Unit +A$0.06 +A$0.04 +A$0.02 -A$0.02 -A$0.04 -A$0.06 Contingency graph for purchasers of British pound put options Exercise price = A$1.50 Premium = A$0.03 Future spot rate A$1.46 A$48.A$1.50A$1.52 A$1.54 Contingency graph for sellers of Contingency graph for sellers of British pound call options British pound put options +A$0.06 +A$0.06 Exercise price - A$1.50 Exercise price - A$1.50 +A$0.04 Premium =A$0.02 +A$0.04 Premium = A$0.03 +A$0.02 A$1.46 A$1.48 A$1.50 A$152 $1.54 -A$0.02 Future spot rate -A$0.04- -A$0.06- Net profit per unit +A$0.02 AS16 A$1.48 A$1.50 A$1.52 A$1.54 -A$0.02- Future spot rate -A$0.04- -A$0.06

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To calculate the net proceeds of selling 146 million using put options and the foreign exchange mark... View the full answer