1. A speculator purchased a call option on Japanese Yen at a strike price of $0.70 and for a premium of $.06 per unit. At the time the option was exercised if the Japanese Yen spot rate was $.75
a) Find the speculator’s net profit per unit?
b) If each contract is made up of 62500 units what is the net profit per contract?
c) At which spot price will the speculator break even?
d) What is the net profit per unit to the seller of the call option?
2. A put option on euros is available with a strike price of $1.29. This is purchased by a speculator for a premium of $0.03. If the euro spot rate on the day of expiration is $1.24, indicate if the speculator should exercise the option on this date or let it expire. What is the net profit per unit to the speculator? What is the net profit per unit to the seller of this put option?