Suppose you bought to open a long position one December 2020 Canadian dollar futures contract at $0.7507/C$. The initial margin requirement on the Canadian dollar futures contract is $1,760 and the maintenance margin requirement is $1,600 on the CME. Contract size is C$100,000.

1. Calculate the account balance and cash flows for the first, second, and third days if the settlement price of the contract turns out to be $0.7503/C$ at the end of the first day, $0.7482/C$ at the end of the second day, and $0.7531/C$ at the end of the third day.

2. Suppose the settlement price of the contract at the end of the last trading day is $0.7659/C$. What is your obligation if you do not close your long position at the end of the last trading day of the contract? Explain in one sentence. Draw a cash flow picture of your obligation on the delivery date.

Use the following information to answer Questions 3-4:

Suppose you sold to open a short position one December 2020 Swiss franc futures contract at $1.0970/SF. The initial margin requirement on the Swiss franc futures contract is $4,950 and the maintenance margin requirement is $4,500 on the CME. Contract size is SF125,000.

3. Calculate the account balance and cash flows for the first, second, and third days if the settlement price of the contract turns out to be $1.0980/SF at the end of the first day, $1.0960/SF at the end of the second day, and $1.0950/SF at the end of the third day.

4. Suppose the settlement price of the contract at the end of the last trading day is $1.0890/SF. What is your obligation if you do not close your short position at the end of the last trading day of the contract? Explain in one sentence. Draw a cash flow picture of your obligation on the delivery date.

Use the following information to answer Questions 5-7:

Suppose you bought a December 2020 British pound call option with an exercise price of $1.4000/. The price of the call option was $0.0150/.

5. What will your payoff and profit per be if the spot exchange rate is $1.4050/ on the expiration date?

6. What will your payoff and profit per be if the spot exchange rate is $1.5000/ on the expiration date?

7. What will your payoff and profit per be if the spot exchange rate is $1.3750/ on the expiration date?

Use the following information to answer Questions 8-10:

Suppose you bought a December 2020 British pound put option with an exercise price of $1.4000/. The price of the put option was $0.0160/.

8. What will your payoff and profit per be if the spot exchange rate is $1.3975/ on the expiration date?

9. What will your payoff and profit per be if the spot exchange rate is $1.3700/ on the expiration date?

10. What will your payoff and profit per be if the spot exchange rate is $1.4800/ on the expiration date?

11. The December 2020 British pound call option with an exercise price of $1.4000/ is selling at a price of $0.0200/. The spot price of British pound is $1.4175/. What is the intrinsic value of this call option? What is its time value?

12. The December 2020 British pound put option with an exercise price of $1.4100/ is selling at a price of $0.0150/. The spot price of British pound is $1.4000/. What is the intrinsic value of this put option? What is its time value?

13. Draw the payoff and profit profiles of a British pound call option at expiration for the long party. Assume that the exercise price of the option is $1.4000/ and the price of the option is $0.1000/.