I have some euros in my bank account (Currently: euro = $1.50). I also bought a...

I have some euros in my bank account (Currently: euro = $1.50). I also bought a put option on euro (X=$1.50, Premium=$0.02). a. Draw the combined graph. b. What is the name of this strategy? What is the objective with this strategy? c. How many break even points are there? What is (are) the break even point(s)? d. If ST=$1.35/euro just before expiration, what is my profit? e. If ST=$1.60/euro just before expiration, what is my profit?

Expert Solution

pay off from Put Option = MAX (strike price - stock price, 0) - premium per share =MAX (1.50 - stock price, 0) - 0.02

Pay off from Asset holding = Stock price -1.50

Pay off from strategy = [Stock price -1.50]+MAX (1.50 - stock price, 0) - 0.02

Answer a)

Answer b) Purchasing an asset and simultaneously purchases put options create Married Put Strategy of investment .

Answer b.1) The strategy use to protect downside risk of holding asset. The strategy work as an insurance policy in case of fall of price.

Answer C) One break even point ,

at Break even Total Pay off = 0

0= [Stock price -1.50]+MAX (1.50 - stock price, 0) - 0.02

=> Stock Price = 1.52

Answer D) Pay off at 1.35,

Total Pay off = (1.35-1.50) +MAX(1.5-1.35,0)-0.02 =$ -0.02

Answer e) Pay off at 1.60

Total Pay off = (1.60-1.50) +MAX(1.5-1.60,0)-0.02 =$ 0.08

jeff jeffy answered 9 months ago

Currently, I owe euros (short position in euro). Currently, 1 euro = $1. There is a...

Currently, I owe euros (short position in euro). Currently, 1 euro = $1. There is a call option on euro with an exercise price of $1/euro and a premium of $0.02/euro There is also a put option on euro with an exercise price of $1/euro and a premium of $0.03/euro Is there an arbitrage opportunity here? (no risk and all profit) If so, explain. (Hint: think about combining your short position in euro with positions in both the call and...

Currently, I have $2,500 in my bank account that pays 6% APR with monthly compounding. In...

Currently, I have $2,500 in my bank account that pays 6% APR with monthly compounding. In order to have $12,000 in this account in 5 years, how much money should I add to this account each month starting from next month?

I have $62,000 in my investment account. I want to add $2,000 each month into this...

I have $62,000 in my investment account. I want to add $2,000 each month into this account starting today. I am expecting to earn 1%/month. How much will I have in this account in 2 years? *Please post formulas or calculations done by calculator*

How do I add the information below to my current code that I have also posted...

How do I add the information below to my current code that I have also posted below. <!DOCTYPE html> <html>  <body> <header> <h1> My Grocery Site </h1> </header> <article> This is web content about a grocery store that might be in any town. The store stocks fresh produce, as well as essential grocery items. Below are category lists of products you can find in the grocery store. </article> <div class...

What Account Titles do I use to record these transactions??? ALSO I HAVe to Keep a...

What Account Titles do I use to record these transactions??? ALSO I HAVe to Keep a running balance of the average per share amount of the common shares. On January 1, 2017, Hum Enterprises Inc. had 64,000 common shares, recorded at $512,000. The company follows IFRS. During the year, the following transactions occurred: Apr. 1 Issued 5,000 common shares at $10 per share. June 15 Declared a 5% stock dividend to shareholders of record on September 5, distributable on September...

I am currently 25 years old. I have $20,000 invested in a brokerage account that I...

I am currently 25 years old. I have $20,000 invested in a brokerage account that I expect to give me a return of 8% compounded semi-annually. I am planning to work until I am 60 and put some money away monthly in a saving account that gives me a return of 2.05% compounded daily (First payment will be one month from now and last payment will be the month I retire. You can assume I turned 25 today. Also, assume...

This is my C language code. I have some problems with the linked list. I can't...

This is my C language code. I have some problems with the linked list. I can't store the current. After current = temp, I don't know how to move to the next node. current = current-> next keeps making current into NULL. #include #include #include #include struct node{int data; struct node *next;}; int main() { struct node *head, *current, *temp, *trash; srand(time(0)); int randNumber = rand()%51; if(randNumber != 49) { temp = (struct node*)malloc(sizeof(struct node)); current = (struct node*)malloc(sizeof(struct node));...

You currently have $60,000 in your bank account and you will need a total of $100,000...

You currently have $60,000 in your bank account and you will need a total of $100,000 in 5 years to pay for a down payment on a house. What interest rate do you need to earn in order to have $100,000 in your bank account 5 years from now?

I and my husband Jatin have total amount of $150,000 in our savings account. We have...

I and my husband Jatin have total amount of $150,000 in our savings account. We have 3 school going kids. We want to buy a new home, a new car and keep funds for children higher education. We finalized to buy a home for $760,000. We may use $120,000 of our savings as a down payment on it. For balance financing the mortgage specialist/agent gave us the following options: Option 1: a 25-year mortgage/loan, with semi-monthly payments (at the end...

I and my husband Jose have total amount of $150,000 in our savings account. We have...

I and my husband Jose have total amount of $150,000 in our savings account. We have 3 school going kids. We want to buy a new home, a new car and keep funds for children higher education. We finalized to buy a home for $760,000. We may use $120,000 of our savings as a down payment on it. For balance financing the mortgage specialist/agent gave us the following options: Option 1: a 25-year mortgage/loan, with semi-monthly payments (at the end...

Question