Today is the expiration day of a put option on the euro that you purchased two weeks

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Today is the expiration day of a put option on the euro that you purchased two weeks ago when the spot rate was $1.0838/€. The strike rate on the option is $1.0820/€ and the premium was $0.0320/€.

What were the intrinsic value and the time value of the put at the time of purchase?

If today’s spot rate is $1.0680/€, would you exercise? Why? How much would your payoff be? How much would your profit/loss be?

Repeat part b under the assumption that today’s spot rate is $1.1012/€.

At what expiration spot rate would you break even?

Related Book For answer-question

International financial management

ISBN: 978-1337587211

13th edition

Authors: Jeff Madura

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Posted Date: May 09, 2023 03:31 AM

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Today is the expiration day of a put option on the euro that you purchased two weeks

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a To calculate the intrinsic value of the put option at the time of purchase we need to compare the ... View the full answer

International financial management

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