Question: A trader has written a call and a put on the Canadian dollar. The following information is available: Size of option contract = CAD400,000 Price

A trader has writtena call and a put on the Canadian dollar. The following information is available:

Size of option contract = CAD400,000

Price of call AUD0.01/CAD

Price of put AUD0.01/CAD

Exercise exchange rate of call AUD0.96/CAD

Exercise exchange rate of put AUD0.94/CAD

Calculate the net pay-off on the short call, the short put and the combined position at the following spot exchange rates (AUD/CAD): (a) 0.99, (b) 0.97, (c) 0.95 and (d) 0.93.

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