Q1: Assume there exists a call options contract. The exercise price is $45.5. The contract will expire in three months. Assume that the call premium is $0.75 a) For the long position, what is the payoff function? b) For the short position, what is the profit/loss function? c) Draw two graphs for the above two cases.

Q2: Assume that the value of our account receivables denominated in Euro is 4 million. That amount of currency will be delivered to us in half year. a) what is our company's concern? b) If we decide to use call or put options to hedge, should we buy or sell? c) If the exercise price is $1.72 (per euro), draw profit loss functions and their related graphs. You can assume that the cost of call is $0.02 (for just one euro) and the cost of put is 0.03 (for just one euro). d) Explain what our profit/loss might be if the spot exchange rates in 6 months turns out to be 1.74 and 1.72. You can assume that the cost of call is $0.02 (for just one euro) and the cost of put is 0.03 (for just one euro).