B) Mr. Ali has bought a Call option whereby volume of the currency to be exchanged...
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B) Mr. Ali has bought a Call option whereby volume of the currency to be exchanged is USD100,000 executeable in one week and the exercise price is PKR 165/USD1. As, he has imported some goods and is about to pay to USA exporter. Current prevalent spot rate is PKR153/1USD. Mr Ali has paid a call premium of USD50. After one week: Case 1: The exchange rate of PKR has appreciated by 10% Case 2: The exchange rate of PKR has depreciated by 8% 1. In which case wil Mr. Ali exercise the option? 2. Calculate profit/loss for buyer and seller of contract in both cases. B) Mr. Ali has bought a Call option whereby volume of the currency to be exchanged is USD100,000 executeable in one week and the exercise price is PKR 165/USD1. As, he has imported some goods and is about to pay to USA exporter. Current prevalent spot rate is PKR153/1USD. Mr Ali has paid a call premium of USD50. After one week: Case 1: The exchange rate of PKR has appreciated by 10% Case 2: The exchange rate of PKR has depreciated by 8% 1. In which case wil Mr. Ali exercise the option? 2. Calculate profit/loss for buyer and seller of contract in both cases.
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