Ruth trades currencies for Industrial and Commercial Bank of China (ICBC) in Beijing. She is currently interested in the U.S. dollar/Australian dollar ($/A$) cross-rate. The current spot rate is $0.7200/A$. Ruth believes that the Australian dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $0.8100/A$. She has the following options on the Australian dollar to choose from: Option Put on A$ Call on A$ Strike Price $0.7500/A$ $0.7500/A$ Premium $0.00004/A$ $0.00048/A$ a. Should Ruth buy a put on Australian dollars or a call on Australian dollars? b. What is Ruth's breakeven price on the option purchased in part (a)?

Ruth trades currencies for Industrial and Commercial Bank of China (ICBC) in Beijing. She is currently interested in the U.S. dollar/Australian dollar ($/A$) cross-rate. The current spot rate is $0.7200/A$. Ruth believes that the Australian dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $0.8100/A$. She has the following options on the Australian dollar to choose from: Option Put on A$ Call on A$ Strike Price $0.7500/A$ $0.7500/A$ Premium $0.00004/A$ $0.00048/A$ a. Should Ruth buy a put on Australian dollars or a call on Australian dollars? b. What is Ruth's breakeven price on the option purchased in part (a)?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $1.44/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from: Option choices on the Singapore dollar: Strike price (US$/Singapore dollar) Premium (US$/Singapore dollar) Call on S$ $1.35 $0.047 Put on S$ $1.359 $0.006 Samuel decides to sell one put option in Singapore dollars. What will be Samuel's profit/loss if the ending spot rate is $1.311/S$ in 90 days? Keep all decimal places. Please type in the number without the currency signs. For example, if your answer is $1.25/S$, then type in 1.25 as your final answer.
Alice Inc. imports manufactured goods from Ireland to the U.S. Aliceâ€™s revenues are primarily in US dollars and expenses are primarily in Euros. The CEO of Alice is concerned about her currency exposure over the next six months and is considering engaging in an option contract with Euros as the underlying asset (S). Which transaction would you recommend?a) Buy callsb) Buy putsc) Write callsd) Write putse) Options are unable to hedge Euro expenses
(a) Suppose you are a Bangladesh Citizen who is planning to go to USA. Current Exchange Rate is Tk BDT/$ 85/86 and according to your estimation you need 3.5lacs taka for your trip. i. How much BDT do you need to cover your cost of trip? ii. What is the American Quote in this case? (b) The following exchange rates are given AUD/USD 1.1197/1.2135 & AUD/GBP 2.1920/2.2500. What is the European quote for Pounds?
. Peder Mueller is a foreign exchange trader for a bank in New York. He has $1 million (or its Swiss franc equivalent) to invest for three months. Using the following values and assumptions, Spot exchange rate (CHF-USD1.00) 3-month forward rate (CHF-USD1.00) Expected spot rate in 3 months (CHF=USD1.00) U.S. dollar 3-month interest rate (%) Swiss franc 3-month interest rate (%) 1.2810 1.2740 1.2700 4.800 3.200 He decides not cover his forward dollar receipts-an uncovered interest arbitrage (UIA) transaction. How much profit can he make if his assumptions are true? $4,731 b. $1,538 c. $7,061 d. $12,765
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $1.44/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from Option choices on the Singapore dollar: Call on S$ Put on S$ Strike price (US$/Singapore dollar) $1.322 $1.37 Premium (US$/Singapore dollar) $0.047 $0.006 Samuel decides to buy call options in Singapore dollars. What will be Samuel's profit/loss if the ending spot rate is $1.320/S$ in 90 days? Keep all decimal places.
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $1.44/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from: Option choices on the Singapore dollar: Strike price (US$/Singapore dollar) Premium (US$/Singapore dollar) Call on S$ $1.35 $0.047 Put on S$ $1.589 $0.006 Samuel decides to sell one put option in Singapore dollars. What will be Samuel's profit/loss if the ending spot rate is $1.314/S$ in 90 days? Keep all decimal places.
Suppose that you are a US-based importer of goods from the United Kingdom. You expect the value of the pound to increase against the U.S. dollar over the next 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The U.S. risk-free rate is 4.0 percent, and the UK risk-free rate is 30 percent. These rates are expected to remain unchanged over the next month. The current spot rate is $2.10. a. Whether you should use a long or short forward contract to hedge the currency risk O Long position in forward contract O Short position in forward contract b. Calculate the no-arbitrage price at which you could enter into a forward contract that expires in 30 days. (Do not round intermediate calculations. Round your answer to 4 decimal places.) No-arbitrage price c. Move forward 10 days. The spot rate is $2.13. Interest rates are unchanged. Calculate the value of your forward position. (Do not round intermediate calculations. Round…
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You Answered Correct Answer Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross- rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $1.44/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from Option choices on the Singapore dollar: Strike price (US$/Singapore dollar) Premium (US$/Singapore dollar) -0.132 Call on S$ -0.047 $1.371 $0.047 Put on S$ $1.37 Samuel decides to buy call options in Singapore dollars. What will be Samuel's profit/loss if the ending spot rate is $1.286/S$ in 90 days? Keep all decimal places. $0.006
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Abigail lives in the UK and earns 40,000 pounds sterling per year. Her friend Barry lives in Japan and earns 8 million Japanese yen per year. The cost of a standardised consumption basket is 400 pounds sterling in the UK and 100,000 yen in Japan. The nominal exchange rate is Xy/s = 200, that is, one pound sterling can be exchanged for 200 Japanese yen Is the pound sterling overvalued or undervalued compared to the Japanese yen? Explain you calculations..
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will depreciate versus the U.S. dollar in the coming 90 days, probably to about $1.35/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from: Option choices on the Singapore dollar: Strike price (US$/Singapore dollar) Premium (US$/Singapore dollar) Call on S$ $1.34 $0.075 Put on S$ $1.37 $0.006 Samuel decides to sell call options in Singapore dollars. What is Samuel's (net) profit/loss (in dollars) per option if the spot rate is $1.56/S$ at maturity?

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