4. A put option on euros is available with a strike price of $1.27. This is purchased by a

speculator for a premium of $0.02. The euro spot rate on the day of expiration of the

option is $1.24.

Required:

(a) what is the net profit per unit to the speculator?

(b) what is the net profit per unit to the seller of this put option?

5. You call your bank for the expected price of the dollar in cedis by the end of the year 2020

and the bank indicates that the current (1st May, 2020) exchange rate is GHS5.5800/$ and

that it expects the value of the cedi to fall by 6% by the end of September 2020 and from

the end of September to the end of the year 2020 they expect the value of the dollar to

depreciate by 4%. Assuming all the predictions come true, what will be the expected price

of the dollar in cedis

(i) at the end of September 2020

(ii) at the end of the year 2020.