Question: The table below shows the premiums for several currency options (all the options are maturing in 6 months): Call on AUD Put on AUD Option

The table below shows the premiums for several currency options (all

The table below shows the premiums for several currency options (all the options are maturing in 6 months): Call on AUD Put on AUD Option strike price USD 0.70 for 1 AUD USD 1.20 USD 0.75 Option strike price USD 0.85 for 1 AUD USD 0.9 USD 1.1 The current and 6-month spot currency rates are given below. AUD/USD USD/AUD Current Spot Rate 1 USD = 1.67 AUD 1 AUD = 0.60 USD 6-month Spot rate 1 USD = 1.82 AUD 1 AUD = 0.55 USD i. Calculate the current premium for a 6-month maturity put option on USD with strike price of USD 0.85 for 1 AUD. Show your working. [2 marks] ii. Calculate the terminal payoff for a 6-month maturity call option on USD with strike price of USD 0.70 for 1 AUD. [2 marks]

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