3. Ahmet is a currency option speculator. He wants to speculate on 1,000,000 using currency...
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Ahmet is a currency option speculator. He wants to speculate on using currency option on The current spot rate on $ is $ Ahmet wants to buy an option on Since he expects that will depreciate against $ in months. The strike exercise price and option premium for each option alternative is given in the table below as follows:
Option Strike Price Option premium
Call option on
Put option on $
$ $
$
Based on the information given above, answer the following questions:
a Which option call or put would Ahmet buy based on his expectations?
b Based on your answer in part a what is the breakeven price?
c Based on your answer in part a calculate the total gross profit and net profit in $ for each speculator if the actual spot rate at maturity of the option becomes $
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