a) Consider a PUT option on euros with a strike price of $1.05/€ and an option premium of 8 cents per euro. Calculate the profit (net of the cost of the option) to the holder of the option for the following different possible spot rates at option maturity: $0.90/€, $0.95/€, $1.00/€, $1.05/€, $1.10/€, $1.15/€, $1.20/€. What is the break-even spot rate (the spot rate at which the profit is exactly zero)?
b) List any two important differences between a call option and a put option.