5. XYZ plc has been offered the following quotes foroptions on the dollar given a current market price of60 pence: Strike price of dollar in pence Call premium Put premium 1 year 1 year 62 6.9 3.0 64 5.9 3.8 66 4.8 4.5 67 4.5 5.1
a. Calculate the net payout from a purchased calloption at a strike price of 67 pence for the followingpossible maturity prices 55p, 60p,65p,70p,75p.
b. Calculate the net payout for awritten put option at 66p for the following possible maturity prices: 55p, 60p,65p,70p,75p.
(6 marks)
a. Calculate the total cost of thedollar if the MNC were to implement part a and part bof this question for the following maturity prices: 55p,60p,65p,70p,75p . b. Outline the advantages anddisadvantages of purchasing a call at 67p and writing aput at 66p for a MNC importing from the US.
