1. The one-year forward rate of the British pound is quoted at $1.6258, and the spot rate of the British pound is quoted at $1.6068. The forward is present premium (or discount) at what percent?
2. Bulldog, Inc., has sold Australian dollar call options at a premium of $.02 per unit, and an exercise price of $.89 per unit. It has forecasted the Australian dollar’s rate over the period of concern as $.86, $.87, $.88, $.89, $.91 and $.92. Determine the net profit (or loss) per unit to Bulldog, Inc., if Australia dollar each level occurs (show detailed analysis; follow the five steps in the teaching notes).