to sell call options in Singapore dollars. What is Samuel's (net) profit/loss (in

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter20: Short-term Financing
Section: Chapter Questions
Problem 3BIC
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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
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?
Transcribed Image Text: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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