Assume a call option contract on Australian dollars is available with an exercise price of $$\mathrm{.}95$ per australian dollars and a contract size of AUD$11,000.$ This is a European option, and the premium is $$0\mathrm{.}10$ per australian dollars.

Required:

a$.$ If you take a long position on this contract, at what future spot exchange rate at maturity will you maximize your profit? What is the amount of the maximum possible profit from one contract?

b$.$ What is the maximum possible loss for a buyer of this call option?

c$.$ What is the maximum possible profit from this contract to a call option writer?

d$.$ What is the maximum possible loss for a call writer?

e$.$ At what future spot exchange rate, will the call buyer and writer break even?

Complete this question by entering your answers in the tabs below.

Required A

If you take a long position on this contract, at what future spot exchange rate at maturity will you maximize your profit? What is the amount of the maximum possible profit from one contract?

Future spot exchange rate at maturity and maximum possible profit