You are on options trader specializing in the Singapore dollar. The current spot rate is $0.60/S$. A put option on the Singapore dollar that expires in 90 days with a strike price of $0.64/S$ sells for a premium of $0.00004/S$, while a call option on the Singapore dollar that expires in 90 days with the same strike price sells for a premium of $0.00046/S$. You believe the spot rate will go to $0.68 in 90 days and would like to buy 1,000,000 options. Determine whether based on that belief, you would buy calls or puts, and then calculate how much money you make or lose if you are right and the spot rate goes to exactly $0.68? O $39,540 O $29,540 O-$40,000 $40,000 O-$40,460

You are on options trader specializing in the Singapore dollar. The current spot rate is $0.60/S$. A put option on the Singapore dollar that expires in 90 days with a strike price of $0.64/S$ sells for a premium of $0.00004/S$, while a call option on the Singapore dollar that expires in 90 days with the same strike price sells for a premium of $0.00046/S$. You believe the spot rate will go to $0.68 in 90 days and would like to buy 1,000,000 options. Determine whether based on that belief, you would buy calls or puts, and then calculate how much money you make or lose if you are right and the spot rate goes to exactly $0.68? O $39,540 O $29,540 O-$40,000 $40,000 O-$40,460

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 5ST

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