A 3-months USD call option with an exercise price of USD 1= SGD 1.75 is selling...
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A 3-months USD call option with an exercise price of USD 1= SGD 1.75 is selling at SGD 0.03 per USD. a) Assume the current spot rate is USD 1= SGD 1.70 i) is the call option in-the-money, out-of-the-money, or at-the-money? ii) Will the holder of this option exercise the option? iii) What is the intrinsic value of this option? b) Assume the current spot rate is USD 1= SGD 1.80 i) is the call option in the money, out-of-the-money, or at-the-money? Will the holder of this option exercise the option? ii) What is the intrinsic value of this option? ii) What is the spot rate that will make the holder of this option break-even? How much is the total premium the buyer has to pay if the contract size is USD 300,000€ c) d) Y-Files Corp., based in USA, must pay its UK supplier GBP 187,500 in 3 months' time. It is thinking of buying 6 GBP call options (contract size GBP 31,250) at an exercise price of GBP 1 = USD 1.65 to protect against the risk of a rising sterling pound. The premium is USD 0.08 per GBP. a) How much premium must Y-Files pay to buy the GBP call options? b) What is Y-Files" break-even future spot rate on the option contract? c) If the spot rate in 3 months' time is GBP 1 = USD 1.62: i) What do you advise Y-Files to do? ii) What is Y-Files total cost of buying the GBP 187.500€ iii) What will be the net profit/loss on this option for Y-Files? d) If the spot rate in 3 months' time is GBP 1 = USD 1.68: i) What do you advise Y-Files to do? What is Y-Files' total cost of buying the GBP 187,500? iii) What will be the net profit/loss on this option for Y-Files? A 3-months USD call option with an exercise price of USD 1= SGD 1.75 is selling at SGD 0.03 per USD. a) Assume the current spot rate is USD 1= SGD 1.70 i) is the call option in-the-money, out-of-the-money, or at-the-money? ii) Will the holder of this option exercise the option? iii) What is the intrinsic value of this option? b) Assume the current spot rate is USD 1= SGD 1.80 i) is the call option in the money, out-of-the-money, or at-the-money? Will the holder of this option exercise the option? ii) What is the intrinsic value of this option? ii) What is the spot rate that will make the holder of this option break-even? How much is the total premium the buyer has to pay if the contract size is USD 300,000€ c) d) Y-Files Corp., based in USA, must pay its UK supplier GBP 187,500 in 3 months' time. It is thinking of buying 6 GBP call options (contract size GBP 31,250) at an exercise price of GBP 1 = USD 1.65 to protect against the risk of a rising sterling pound. The premium is USD 0.08 per GBP. a) How much premium must Y-Files pay to buy the GBP call options? b) What is Y-Files" break-even future spot rate on the option contract? c) If the spot rate in 3 months' time is GBP 1 = USD 1.62: i) What do you advise Y-Files to do? ii) What is Y-Files total cost of buying the GBP 187.500€ iii) What will be the net profit/loss on this option for Y-Files? d) If the spot rate in 3 months' time is GBP 1 = USD 1.68: i) What do you advise Y-Files to do? What is Y-Files' total cost of buying the GBP 187,500? iii) What will be the net profit/loss on this option for Y-Files?
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Related Book For
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
Posted Date:
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