Question 1. Mike company is considering the purchase of five three-month Japanese yen call options with an

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Question 1.

Mike company is considering the purchase of five three-month Japanese yen call options with an exercise price of $0.0096 per yen. Each option contract is for 1,000,000 yens. The option premium is $0.000135 per yen. The spot price is $0.009528 per yen and the 90-day forward rate is $0.009571 per yen. What will be the speculator's profit if the yen appreciates to $0.0100 per yen at option expiration?

A speculator is considering the purchase of five three-month Japanese yen call options with an exercise price of $0.0096 per yen. Each option contract is for 1,000,000 yens. The option premium is $0.000135 per yen. The spot price is $0.009528 per yen and the 90-day forward rate is $0.009571 per yen. What will be the speculator's loss if the yen appreciates to $0.009571 per year?

Determine the optimal strategy for the situation by representing it as a game and finding the saddle point. State your final answer in the terms of the original question.

A Republican and a Democratic candidate are running for office in a heavily Republican county. A recent newspaper poll comparing their views on taxes and welfare reform showed that when compared on taxes or on welfare reform, the Republican leads by 10%. When comparing the Democrat on welfare reform to the Republican on taxes, the Republican leads by 40%. But when comparing the Democrat on taxes to the Republican on welfare reform, the Republican leads by only 5%. Use this information to decide what each candidate should discuss at their next debate. (Let T represent taxes and W represent welfare reform)